WHO IS 'NDIS PROPERTY AUSTRALIA'?
NDIS PROPERTY AUSTRALIA PTY LTD (NPA) is a property advisory company that provides an ‘end to end’ solutions service when working with investors and owner occupiers in Special Disability Accomodation (SDA). We also work with SIL Providers, SDA Providers, Participants directly and indirectly, to collaborate with land developers for land acquisitions, with builders for design and construction. The end goal is to deliver as many new homes or apartments or villas which are SDA compliant, to assist Providers in helping their Participants with “choice & control” in how they live their lives. We also work with many professional referral partners to assist their investor clients better understand the complex process of entering into the NDIS property sector with SIL and SDA properties.
WHAT IS NDIS?
The National Disability Insurance Scheme provides support to people with a disability along with their families and carers. The scheme is funded by Australian Federal and State Governments to assist people to access better housing, health, education and community services.
In order for a property to become available to NDIS participants seeking SDA, the property needs to be enrolled and compliant according to SDA Rules, and the owner is required to be registered as an SDA provider.
The National Disability Insurance Agency (NDIA) will then connect NDIS participants with investors and developers who provide “high quality, fit-for-purpose and innovative dwellings.” This means that housing providers are not funded directly from the NDIS, but rather through the individual participants, who have their own approved accommodation budget and so negotiate a rent directly with the housing provider (it is also possible for NDIS participants and non-participants to share the same accommodation, with rents for each being separately negotiated).
The SDA payments that participants receive will be based on the size of the dwelling, its location and the accessibility it provides. These payments are also designed to cover the costs incurred in the bricks and mortar construction of the property, and offer a return on investment (ROI) at market rates of up to 18%pa, though a conservative range would be 10-12%pa.
There will be a variety of platforms available for providers to find tenants, and there is also the option for SDA properties to be made available in other markets as well.
WHAT IS NDIS FUNDING?
The funding for Specialist Disability Accommodation provides an investor with an above average rental income for putting their hand up to provide SDA accommodation. If a disabled person is assessed as requiring Specialist Disability Accommodation, funding will be included in their NDIS plan to cover any disability related housing costs that are above the ordinary costs of housing for them and their support coordinator. Funding is used to source the most appropriate accommodation in the marketplace for themselves.
AT WHAT AGE DOES NDIS FUNDING STOP?
A person ceases to be a participant in the NDIS when they enter a residential care service on a permanent basis after the person turns 65 years of age.
HOW MUCH MONEY DOES THE NDIS GIVE OUT?
The NDIS will provide $30 billion for the next three years (from 2022 onwards) to Australians who are living with a disability.
WHAT IS SDA?
Some participants in the NDIS will receive funding for SDA. SDA stands for ‘Specialised Disability Accommodation’ and is a system created under the NDIS for people with high support housing needs to ensure they are able live independently and also receive support they require whilst at home in specially designed or adapted homes to help deliver their support needs.
SDA service providers hold the head lease and oversee the process of securing accommodation for the tenants. The SDA provider has an agreement in place with SIL providers (care services) and their role is to ensure the house has tenants and is maintained to high standard. They deal with all the related NDIS agencies and are the only entity who can handle SDA payments. They also ensure that RRC payments are managed from the tenants.
WHO QUALIFIES FOR SDA FUNDING AND ACCOMMODATION?
The NDIS (National Disability Insurance Scheme) provides the SDA funding for people whose disability or ongoing very high support needs require special accommodation which enables them to receive housing, care and onsite support by their carer.The NDIS (National Disability Insurance Scheme) provides the SDA funding for people whose disability or ongoing very high support needs require special accommodation which enables them to receive housing, care and onsite support by their carer.
There are 4 levels of NDIS SDA homes each designed for a different level of disability and care:
- Improved Livability – built to LHA Silver Level
- Fully Accessible – built to LHA Platinum Level
- Robust – built to LHA Silver Level
- High Physical Support – built to LHA Platinum Level
WHAT IS RRC?
This is a Reasonable Rental Contribution (RRC) paid by the tenant, capped at 25% of the base rate of the Disability Support Pension and 100% of any Commonwealth Rental Assistance scheme. This is the same for the participant no matter where they live; it is approximately $9,200 p/a per person.
WHAT IS SIL?
Supported Independent Living (SIL) refers to the support or supervision to develop the skills of an individual to live as independently as possible. SIL provider’s role is to provide care services for the persons with a disability and have agreements in place with SDA providers.
WHAT DOES SIL FUNDING COVER?
Supported independent living is the name of the NDIS funding that provides supports to people with disability to help them live as independently as possible. SIL funding is typically for people who need 24/7 support while living in a shared home. It exists to cover the cost of the support staff in the house.
WHAT IS THE DIFFERENCE BETWEEN SDA AND SIL?
Supported Independent Living (SIL) is the support or supervision of daily tasks to live independently. Supported Disability Accommodation (SDA), on the other hand, is the ‘bricks and mortar’ component for people with disability who have severe functional impairment or highly complex support needs that require specialist housing alternatives.
WHY IS THERE A GOVERNMENT INITIATIVE?
The SDA policy is an ambitious initiative requiring $5Bn to build housing. Government cannot achieve this and thus launched the $700M a year NDIS Scheme to create an investor and user driven market.
The policy aims to empower people with disability to decide where they live and who they live with. The package of support includes annual funding to pay for the cost of their housing where the participant has a separate amount in their package to pay for their attendant care support needs to live independently in our communities.
It is anticipated that the SDA pricing and framework will continue for 20 years, after which your property will revert to the general market.
WHY SHOULD I INVEST IN SDA?
The NDIS’s SDA funding scheme will provide accessible housing for those Australians with a disability who require specialised housing. Housing is delivered through an ongoing subsidy for people with a disability to access housing.
Before NDIS was implemented, the funding for housing people with disabilities mostly came from governments or non-profit providers using upfront capital grants. As banks have started to become lenient and are lending to finance SDA projects, there is a growing appetite among investors for investing in SDA housing projects.
- Out of the 400,000 participants in the NDIS, an estimated 28,000 of them qualify for SDA.
- Currently there are around 16,000 people in accommodation that is inappropriate for them, because it doesn’t meet their needs, they are isolated from the community, and they really have no choice.
- 50% of the 16,000 are living in aged care facilities, while the other 50% are living in unsuitable situations (inappropriate design, living with aging parents, etc).
- The Summer Foundation, estimate that there will be an additional 33,000 people who will come out of the woodwork and join the NDIS program.
- That is potentially nearly 50,000 people needing Specialised Disability Accommodation.
- Sadly, only around 650-700 places were created in the past 12 months (2019).
- There is an incredible need and a chronically short supply.
The SDA scheme is designed to address the massive under supply. Demand is not the problem here, and if you can build the right home for the participants, then your property will not face the problem of vacancy.
Furthermore, the government wants to motivate private investment of $5 billion to encourage the build of brand-new residential properties built for inclusion in the scheme. The government has committed $700M per annum in the SDA scheme funding from the overall NDIS budget of $22B planned over 20 years.
Your investment property not only provides rental income for yourself, but it provides the perfect home for Australians with disability – moving them out of inappropriate aged and other institutionalised care and place them in suitable housing. This is a perfect example of ‘Impact Investing’ – a win-win situation.
HOW CAN THE GOVT SUSTAIN SUCH A HIGH BUDGET?
Research demonstrates that for the government to accommodate one person with disability and provide them with services at the same time, it costs both government and tax payers around $1M per annum. And for a person who ends up in a hospital disabled, whilst recovering and waiting on suitable accommodation, this person costs government and tax payers around $1,500 per day to accommodate them in the hospital.
If this research is accurate or even half accurate, by you the investor receiving circa $30,000 to $50,000 per participant per year you are saving both government and tax payer an incredible amount of money they have to spend otherwise. So yes, it is financially absolutely viable. If it costs $1M to accommodate one applicant in the system, this means a savings of $950,000 per annum per Participant, therefore this is a significant savings for the Government.
WHAT MAKES SDA PROPERTY INVESTMENT APPEALING?
The approach to SDA funding has been to make investing in accommodation designed for NDIS participants both commercially viable and attractive for investors.
A summary is as follows:
- The NDIS is attractive to investors who want a long term, steady income, while receiving market-beating yields.
- NDIS properties are being built in high demand areas where clients are already investing.
- Gross rental yields of up to 25%* on the high end, and 10% gross yields on the low end. However after costs, investors should expect an average 10-15% pa net return just to be conservative, as it depends on many factors.
- Prices start from around $500K, and can range up to $900K, as a ball park figure. It all depends on land prices in the area selected, and the inclusions required for the different category of participants living within the SDA home.
WHAT ARE THE STATS SO FAR IN UPTAKE IN THE NDIS SCHEME?
Around 650-700 new SDA places were created or commissioned in the past 12 months (2019/20).
Only 250-300 of these were for unmet demand. The remaining 400 were to rebuild existing & outdated government disability housing stock.
For 2019 there was only $70M spent on SDA funding for accommodation. The target is $700M every year.
The 2020 numbers are estimated to be between 600-900 brand new homes due for completion around Australia. In March 2020 it was forecast to be 200 for 2020, but this is revised up due to demand from investors.
Over the next five years (2020-2025), there will be 16,000 new or refurbished SDA places needed around Australia.
HOW DOES 'NDIS PROPERTY AUSTRALIA' HELP CLIENTS IN PURCHASING SDA PROPERTY?
NPA provides an ‘end to end’ solution for clients, assisting with the land acquisition, & the vetting of builders, & assisting with the advice on SDA providers who have participants that might be suited to proposed homes being built.
We can provide them with a choice of investment options based on properties that are being developed and built specifically to be SDA compliant, for instance, or connect them with relevant industry professionals to guide them through the process of applying for NDIS investment finance and completing a purchase.
Our connections within NDIS, combined with our industry knowledge and experience in land acquisition and construction of homes, means that we can take care not only of finding tenants for your property, but also the ongoing maintenance and upkeep through appointing a well qualified SDA provider.
WHERE IS THE LOCATION OF NDIS HOUSING?
Proximity to transport, shops, entertainment and other essential services is critical to enabling people with disability to easily leave their homes and live a meaningful life. When investing in a NDIS home, ensure they are within close proximity to essential services and also within other ‘normal’ communities.
WHO CHOOSES THE HOUSE & LAND LOCATIONS WHERE NDIS HOUSES ARE LOCATED?
At NPA, we work very closely with the builders for the designs and pricing of houses, and also various land developers to secure ‘correct sized’ land lots for these builders to build upon. The houses and the location are chosen and custom built for the waiting participants (disability tenants) needs under the guidance of the providers, who keep a finger on the pulse of market demand, courtesy of statistics provided by the NDIA. So in essence, the info gathered from NDIS ecosystem shows the areas in which are of high demand for accommodation, and thus builder will work with the provider to identify the areas and ensure the designs of homes proposed are compliant. From there land is sourced and build designs and inclusions are packaged up by the builders we work with, for the specific needs of waiting participants, in the areas which have pent up demand.
CAN AN SDA HOUSE BE BUILT ANYWHERE?
The land and location must meet SDA requirements, so not just any block in any location will be suitable. SDA funding is running nationally, and SDA Homes can be built Australia wide. The location needs to be close to amenities such as health care, employment hubs and transport. The land must have no more than a 7-degree slope to the road to be approved.
HOW TO GET A PROPERTY INVESTMENT LOAN FROM LENDER?
Some lenders have become lenient when it comes to lending money for SDA projects and property. Besides providing home loans for participants, lenders are encouraging investment loans for family, friends or any interested investor. Since there is a 20 year rental backing from the government for SDA property, lenders should be willing to lend to investors with a deposit of 20%, but we still recommend investors have a large amount of cash available to consider this opportunity. Here are some ways you can get a loan approved for SDA funding:
- Find an SDA compliant builder who knows the requirements of the participants.
- Get a deposit of at least 20% so you do not have to pay LMI.
- A good credit history.
- Exceptional credit score
- Stable employment with good income.
- Build a house that has an adaptable design to accommodate people with different disabilities
HOW MUCH CAN I BORROW?
Borrowing to build a Specialist Disability Housing is generally limited between 60% to 80% as this is a niche segment that is still growing. Furthermore, you might be able to borrow more if you plan to invest in a property that requires more improvements according to the SDA Design Category. In theory, you can borrow up to 80% of the total cost of land and construction. We reiterate, in the word ‘theory’ because lenders are few and far between and its going to take time for most lenders to open up to this NDIS sector for residential lending.
WHAT ARE THE CHALLENGES OF GETTING A HOME LOAN?
Since this is a niche area of finance for lenders to be in, investors are bound to face some challenges as an borrower:
- The biggest challenge is that the banks do not lend for NDIS. Is it usually a non bank lender, and even then its very rare to locate a funder. Even if they do lend, it is rare for them to do construction lending for NDIS as well. NPA can refer clients to specialists for finance upon request if unable to secure finance from traditional lenders.
- It is recommended that investors have between $250,000 – $350,000 cash and or equity that can be redrawn from existing property, to obtain a new home loan with a lender. We have spoken to few brokers who have said they cannot find a bank to lend to clients for NDIS residential property. Crazy!!!
- As the requirements for Specialist Disability Housing are quite specific, the cost of construction might exceed the final value. The property may become overcapitalised. This happens quite a lot if its a custom build due to provider requests of the builder, prior to building for the participants.
- The property is only made for a specific niche of people, so it might be harder to sell later on.
- Lenders generally do not prefer to lend to long terms leases to tenants. They would rather see you sell the property.
- Since the property is extremely specialised (i.e. a normal abled tenant would not live there), some lenders would not accept it as security.
- There could be problems with valuations as the property might be valued as a normal housing and will not account for the special modifications made to it.
- The construction has to be compliant; signed off by a SDA design certifier.
- There could be vacancy rates if the tenant moves out, while waiting for a new tenant to come in.
- While you can build anywhere in Australia, there are concentration limits on land, so land approval might be an issue. There are restrictions on the number of dwellings that can be in a particular area.
WHAT HAPPENS AFTER 20 YEARS?
The investor can sell the property as per standard Real Estate legislation requirements, and the investor has the option to roll over their agreement and continue the NDIS as Existing NDIS stock once the 20 year period is up, as well.
CAN I PURCHASE AN NDIS PROPERTY THROUGH A SMSF?
Yes, you can, but if borrowing only as a single contract. This would normally mean you would need to purchase the property in cash from your SMSF. Only single contract purchases can be purchased in a SMSF, not a 2-part contract purchase.
IS THERE ANYTHING SPECIAL I NEED TO DO/SET UP WHEN PURCHASING AN NDIS SDA INVESTMENT PROPERTY?
A Family Trust is worth considering for holding this type of investment due to its tax benefits, but we suggest you speak to your Accountant or Financial Advisor for advice. We can refer you to a planner, accountant or broker to assist.
CAPITAL GROWTH AND RESALE OF THE PROPERTY
Often we are asked about capital growth; it is our logic that the property will attain land value and should achieve similar growth as per other homes around it. Aside from wider passageways, and doorways and other features, it is very easy to turn the dwelling into one that any family could comfortably live it. Based on this logic, we are of the opinion (opinion only) that your SDA property will escalate in value and achieve capital growth during the life of the investment. If the location achieves say an average of 4.0% per annum, there is no logical reason why your SDA home should not achieve a similar growth or the same growth.
Yes, upfront it cost more to build and taking this into consideration, especially if sold as a SDA dwelling, your investment should hold its value. After 10 years it should have achieved capital growth, however investing in a SDA property is investing for very high rental yields and secondary is the bonus of capital appreciation.
WHERE ARE YOUR NDIS SDA HOMES LOCATED?
Currently we have NDIS SDA homes available throughout the country. Our properties are spread between regional and more central areas due to the demand for disability housing. We are taking a cautious approach to housing placement, fully aware that we don’t want to see an oversupply of property in any area. Once we have placed tenants in our current supply of properties, we will then continue to work with Service providers, to create an ongoing balance between supply and demand.
WHO FINDS SUITABLE TENANTS FOR EACH PROPERTY?
A SDA Provider, once engaged, will be the specialist property management firm that works with NDIS Service Providers in assisting their NDIS clients to apply for and be placed in suitable Specialist Disability Accommodation. This process starts as soon as the property has been registered with SDA and the commencement of the build, with the intention of having the property occupied as soon as possible after the property is completed.
DOES THE SIL PROVIDER HAVE TENANTS LINED UP TO MOVE IN?
Most likely, yes, but there are no guarantees. With careful planning and working with an efficient provider, and the vetting in advance of potential participants, one would hope that tenants will be ready to move in on completion of the new home. However there is no guarantee that this will always happen on day one, and one must assume a short period of time between house completion and transition to bring the participants into accommodation. This all depends on the area chosen and the number of participants in the waiting list.
IS THERE ANY WAY TO GUARANTEE TENANTS?
While there is a massive demand and shortage, there is absolutely zero guarantee that anyone – the Real Estate Agent, or the SDA Provider, or the SIL Provider or the Builder – will guarantee you tenants. It’s simply impossible to do that and anyone doing this is to be avoided.
However, based on research undertaken, many disabled SDA residents want to “stay for life”, when they are in appropriate accommodation and our team have mitigated that risk as much as possible, thanks to the process of building the design of the home according to participants requirements in the area, and consulting with the SDA provider(s) as to whom they have on their waiting list for accommodation. Sometimes, we may only build once we have participants qualified and thus building to their specific requirements (custom build) but this will add much more money to the price tag. Then, and only then, is there is a very strong chance that the property will tenanted quickly after completion of the brand new house. The provider must be approved with NDIS, and the builder needs to be approved by NDIS, and the house package must be approved by NDIS. We are not going out to market to find a ‘block of dirt’ to get a house ‘plonked onto it’ just to leave it empty. That’s not what we do!
When our team put a property together, the steps are:
- Coordinate with the care organisation and meet the need where they have existing demand
- Test demand in new areas by placing ads to get interest or applications from tenants.
- After establishing demand, we first need to find land that comply with the NDIS specifications
- After identifying sites we then need to confirm that the location meets the requirements of the care organisations
- Determine the right house design wanted by the care provider can be placed on the land.
- Present property package to our investors (i.e. you)
- Take sales advice deposit from investor.
- Have the sales contracts for the land and construction drawn up from the land developer and the builder. Note: we have fixed price contracts with zero variations allowed to eliminate any surprises during construction.
- Contracts signed and returned to the builders and you enter the standard finance period before moving onto unconditional.
- Upon moving to the land settlement or slab phase of construction, the care provider needs to be engaged by the investor to begin the process of vetting tenants on-boarded into the SDA. This gives them about 4 months to have tenants prepared and ready to move in on completion of the new home.
What we say to anyone looking at investing in NDIS property, is that the absolute WORST CASE SCENARIO, is that the house can be rented on the open market at market rate, eg $500/w, if there are no participants available to rent the brand new home. Yields would be about 5.0% pa usually, but the likelihood of this happening is very unlikely. The demand right now, is very strong, especially in Queensland as the program is quite new and there are many more participants than properties. If you are building a NDIS home in an area where there are 40 people on the waiting list to find accommodation, then the chances of having a vacant home funded by government with free 24/7 care provided for free, is impossible to fathom.
P.S – assume you get only one tenant who is a High Physical Support participant with a OOA, and the other two rooms are vacant for the rest of the year, that means the rental income is $41,470 + $9,300 = $50,770 pa, just from this one room only, and this is twice as much as you would get if you were to lease the entire home to a family at $500 per week.
P.S.S – with one High Physical + one other participant + one vacant room, the rate is for the High Physical participant is higher = $44,500 + $9,300 = $53,800 just from the High Physical tenant “alone” (see table below). Therefore, the less people in the SDA home, the higher the rent per room occupied.
HOW DOES THE LEASE AGREEMENT WORK WITH MORE THAN ONE TENANT?
A separate lease agreement is signed with each tenant, and these are either 1 or 2 years, most likely a 2 year lease agreement.
WHEN DOES AN INVESTOR RECEIVE RENT PAYMENTS?
RRC is paid fortnightly and NDIS payment processed monthly.
WHAT HAPPENS IF ONE TENANT MOVES OUT AND IT TAKES A WHILE TO FIND A NEW ONE?
Like all ongoing investment property ownership, there is always the risk of losing a Tenant. Although research has shown that once someone with a disability finds a home they are happy with, they don’t ever want to move. Once your property has been enrolled and tenanted initially, the NDIS has allowances for vacancy payments while other participants are sourced (NDIS SDA portion only). Providers have an obligation to find another participant and in most cases have participants on a waiting list. The amounts covered are for up to 60 days for properties with 2 or 3 participant rooms, and for up to 90 days for properties with 4 or 5 participant rooms.
HOW DOES THE MANAGEMENT AGREEMENT WORK WITH THE SDA PROVIDER?
The lease management agreement between the provider and landlord can be issued as 2 x 10 years or 4 x 5 years. SILs prefer long term leases, as this suits the client’s needs best, so there is no expectation for them to leave after the first lease term and remember that the house design has been built around their specific needs, so there is little benefit to leaving accommodation which suits the tenants.
WHAT HAPPENS AFTER THE FIRST 24 MONTHS?
Leases between the SDA provider and the participant are normally for 2 years. These new homes are very sought after as many disabled people are currently living in less desirable accommodation like nursing homes, hospitals or low standard living accommodation so are likely to stay for an extended period. The lease is extended based on all participants living happily together. It is up to the SIL to ensure all tenants are happy and if not, move participants in or out to provide the best outcome for the participant and the household.
WHAT QUALIFIES A TENANT TO RECEIVE SDA FUNDING?
Please note that to get the benefit of the SDA payments, the tenant must fulfil the requirements needed for either Improved Liveability, Fully Accessible, Robust or High Physical Support. Some of the improvements required according to the Design Category are:
- Improved livability: Luminance contrasts, improved way finding and/or line of sight.
- Fully accessible: External doors and external outdoor areas accessible by wheelchairs, bathroom or hand basin and the kitchen sink, cook top, oven, laundry, etc. that is accessible in seated or standing position, power supply to doors and windows (retrofit of automation).
- Robust: Must be very resilient and use inconspicuous materials that can withstand heavy use and minimises the risk of injury like; high impact wall lining, fittings and fixtures, secure windows, doors and external areas, appropriate soundproofing (if needed), laminated glass.
- High physical support: External doors and external outdoor private areas accessible by wheelchair, bathroom vanity/hand basin, kitchen sink, cook top, meal preparation area and key appliances accessible in seating or standing position, structural provision for ceiling hoists, assistive technology, heating/cooling, household communication technology (video intercom system), emergency power solutions that can withstand at least 2 hours of outage where the welfare of the participant is at risk, doors with 950mm minimum clear opening width to all habitable rooms.
WHAT IS AN EXAMPLE OF THE TENANTS AND THE FUNDS PAID?
The figures below estimates are gross, and may vary slightly due to the region :
• 2 x High Physical Support $80,991 + RRC $18,825 (Total p/a approx. $99,000)
• 3 x High Physical Support $111,991 + RRC $28,236 (Total p/a approx. $140,000)
HOW DO LANDLORDS GET THE RENTAL INCOME?
Payments for an NDIS SDA property are paid differently to that of a non NDIS property. Your rental payments will be paid to you from the provider at the end of each calendar month.
The SDA payment from the NDIS is a standardised annual amount calculated based on the dwellings location, size and level of accessibility. This is on a per tenant basis.
Each Tenant’s payment is made up of 3 parts;
- Fair rent contribution (25% of base disability supplement): paid fortnightly by the participant (tenant)
- 100% Commonwealth Rent Assistance: paid fortnightly by the participant (tenant)
- NDIS SDA Payment: paid quarterly in arrears.
Once the NDIS participants are eligible for SDA and added to their NDIS plans, they can go to the market and choose a property they’d like to stay in. Depending on what suits their personal needs, they have the options to choose from single-occupancy apartments to shared facilities like villas and group houses. The property must be registered with NDIS as an SDA compliant property in one of the four categories below:
- Fully Accessible
- High Physical Support
- Improved Liveability
The provider (property manager) would then receive payments from the NDIS and Department of Social Services (DSS) which is then paid to the investor. You only get paid once the participant starts living in the property.
CAN I AS AN INVESTOR LEASE OUT MY PROPERTY THROUGH A LOCAL REAL ESTATE AGENT?
An NDIS SDA home must be managed by a property manager that is registered service provider under the NDIS. There are very strict practices that have to be adhered to when working with people in the disability sector and only an authorised service provider can manage your property.
IS THERE A BOND PAYABLE BY THE TENANT FOR AN NDIS PROPERTY?
Currently in QLD there is a bond payable when letting an NDIS SDA property, although Queensland has yet to incorporate specific legislation surrounding SDA with the RTA. With multiple tenants, at present, all are handled under a rooming accommodations agreement where all are charged separately per room and not as part of a single lease arrangement. The bond fee will be the equivalent to four weeks rent for each participant per room (which is the participant contribution amount only, the NDIS payment is not factored for bond calculation).
AT WHAT STAGE IS MY PROPERTY ELIGIBLE FOR ENROLMENT?
Under current NDIS SDA policy the enrolment application commences as soon as you have received the certificate of practical completion from your builder, and we are in receipt of the required documentation. New policies are being introduced throughout the year and we will hopefully see the introduction of pre-certification of SDA dwellings. (This is a pre enrollment approval pending completion of your build as per requirements of relevant codes and NDIS SDA requirements).
WHEN DOES SDA CERTIFICATION / COMPLIANCE HAPPEN?
Compliance is checked at several stages throughout the process.
1. At the plan stage
Before committing to the land and build contracts, the package goes in for initial certification with the SDA certifiers. This then goes into local council fo Building approval like a normal house build.
2. At the frame stage
The certifier will come to the site to ensure that the approved plan is matched.
3. At completion
Final certification will happen when the home is at Practical Completion. This process ensures that the investor will be able to receive SDA funding. Without certification the house will never be able to have NDIS/SDA tenants and therefore will not receive the high returns.
WHAT IS AN ACCREDITED SDA ASSESSOR?
The Specialist Disability Accomodation (SDA) design standards released on October 25th 2019, supersede the Livable Housing Design guidelines that SDA had been based on until now.
The release of the standards means that from 1st July, 2021, all applications to enrol a dwelling for Specialist Disability Accommodation (SDA) will be required to include a certificate from an Accredited SDA Assessor.
SDA assessors will as a part of the certification process, nominate the Design Category the dwelling satisfies based on the Design Standards.
The new Design standards mandated SDA assessors can be 1 of 4 professions:
- Builder surveyors
- Occupational Therapist
- Access Consultant
WHO ARRANGES WHICH TENANTS WILL BE LIVING IN MY HOME AND HOW DO I KNOW THEY WILL BE COMPATIBLE?
The SDA Provider will deal with all of the SIL Provider directly, any opportunities will be presented to you for your consideration, so you don’t need to deal with the NDIS directly at any time. The SIL’s will be the ones to match together the tenants, which is the best way to handle the process. They will already know the clients they have on their books, and their personalities and requirements to match them with an appropriate house and co tenant (e.g. younger people tend to want to live in larger groups, older participants would prefer to share with one other occupant).
WHO IS RESPONSIBLE FOR MAINTENANCE AND THE ASSOCIATED COSTS?
It is generally considered that Tenant’s will look after their own maintenance of the home, but it is suggested that a Landlord look after lawn mowing and basic garden maintenance. The Landlord is responsible for all other normal maintenance as per any other investment property. The Tenants would be responsible for damage caused to the property.
WHO IS RESPONSIBLE FOR UTILITLES?
The Tenants, but it is advised that Landlord’s connect utilities such as NBN, electricity and phone connections in their own name and bill the ongoing costs back to the Tenant’s, as it will be hard to get connections made to the home with 3 separate Tenant’s.
WHAT’S THE ESTIMATED TIME TO GET TENANTS INTO MY PROPERTY?
Unlike a non NDIS SDA style home, there are many factors at play when looking for and securing an NDIS SDA approved Tenant. Location of the Property, suitability of the style of property in that area, demand for that style of home with a suitable tenant and current Government ‘red tape’ are just some of the factors come into play. The Provider committed to finding suitable tenants as soon as possible. The process of looking for a Tenant starts before the build has even started. We work closely with Service Providers, most of which have Participants on file, but there can be many factors that can delay this process also, as they may not yet have SDA funding approval on their Care Plans, or they may need to move out of current accommodation which may take time to transition across. There are still some challenges with the current NDIS structure and speed of delivery, but we are doing our best to push as hard as we can to get a tenant in every one of our homes.
WHAT IS THE LENGTH OF A TYPICAL RENTAL LEASE?
Initial leases will be for 12 – 24 months where possible, but once locked in, they’ve been considered as ‘forever homes’. NDIS homes are built to a very high standard. They do not present as a hostel or over crowded old-style disability housing. These homes are built and designed to a high level, to accommodate and last.
CAN THE GOVT CUT OR REDUCE THE NDIS PAYMENTS MID-WAY THROUGH THE 20 YEAR TERM?
There’s a bipartisan agreement that’s been signed off by all the parties in Canberra – the scheme has a 20 year timeframe of NDIS Certification. All the States and Territories also are unified in this program to ensure federal funding goes where its supposed to go.
IS THE SDA FUNDING HERE TO STAY?
Yes. The SDA funding under the NDIS is a legislated commitment of Australia’s Commonwealth, State and Territory governments, set out in the NDIS SDA Rules (2-18) under the NDIS Act 2013. This legislation provides the foundation for government’s long-term and firm commitment to SDA funding under the NDIS. Beyond the legislative commitment, SDA funding enables eligible participants to achieve better outcomes while representing value for money for the NDIS saving the government and taxpayers a lot of money otherwise spent on accommodating the applicants themselves.
WHO ARE THE SDA PROVIDERS YOU WORK WITH?
We cannot disclose this info for the main reason that the builders we consult with to produce H&L packages in the NDIS sector, have partnered with different care organisations, some of which are private, some public and some are not for profits. This information is normally provided once the landlord has engaged the provider with an application & paid upfront costs, to be hired as their provider. Their role and business is to look after care providers and also participants, not to be fielding calls from a bunch of individual investors calling them to talk about ‘property related matters’. Their focus is caring for people with disabilities, not managing investor questions. They simply aren’t equipped for that and don’t get involved with the property side of things at all (and they usually don’t understand it all really). Ultimately they just want ready-made properties for their clients, they really want to stay away from the investment and property development side of things which is why they work with the builders to handle that side of inquiry for them.
DO YOU EVER BUILD HIGH PHYSICAL SUPPORT HOMES, & CAN I GET ALL PARTICIPANTS AS HIGH PHYSICAL CATEGORY
Yes, the builders we work with will have High Physical design as well as the other variety of different specs and design layouts for the other categories.
No, we cannot be sure of who the participants will be that ultimately live within your property. Even though a High Physical Support design is built, the participants may end up being “HIGH PHYSICAL SUPPORT” + “IMPROVED LIVABILITY” + “FULLY ACCESSIBLE” for a 4 bedroom house, with the 24/7 onsite carer (OOA).
We offer these homes to investors who fully understand the downside of these investments but are prepared to accept those for the higher cash flow they will get. The downside is that they are building a more bespoke home to allow for wheelchairs so the bathrooms, corridors etc. are a little larger than normal, which may not be seen as the same value as the house next door. These are still a relatively regular 4 bedroom home but as you’d imagine, you can notice the additional features on a casual inspection of the property and this may slightly impact the future sale value.
IS IT A COMPLICATED PROCESS ONCE THE HOUSE IS BUILT, OR IS IT VERY PASSIVE?
The SDA provider is the company who is tenanting and then managing the property handle everything. They do the monthly submission to collect the SDA payments according to the number of tenants you have and the payment category they are in. They also collect the Reasonable Rent Contribution (RRC) from the tenants. This is then forwarded to your account monthly (less their management fees). They also do the annual audit of the property that is required too but this is not an additional fee as it is covered by their management fee. Your experience of it is very passive, it’s mostly hands free except for the annual rates and insurance bills etc. What this is called, is an ‘armchair investor’. You sit back and let the professionals deal with all matters relating to your NDIS investment property.
ARE THESE NEW HOMES TURN KEY PACKAGES?
Yes, they are finished and “ready to rent”. Turnkey is a word too loosely used in the building world and can in fact represent a very low level of finish (i.e. no clothesline, mailbox, gardens etc.). The builders we work with have NDIS compliant inclusions that make sure that there is nothing else that’s needed for the property to spend on. You of course get to go through this contract in detail with your lawyer during the cooling off period, just like you would for any property.
WHAT IS THE TIME FRAME TO BUILD A SDA HOME?
We allow around 6 months to build an NDIS SDA approved home. Once land is registered, and Building Approval is approved with Council, the build will have an estimated range of 16-20 weeks time frame, however this may vary depending on builders and regions. Your house will be built as a construction loan with 5 drawdown stages under a fix priced building contract.
IS THE LAND REGISTERED?
In most cases land is registered or close to registration, but investors will know if it isn’t the case. Since the HOMEBUILDER SCHEME was launched, all the home buyers are out in droves on land estates snapping up all available lots. This will have an adverse affect on land availability over the coming 6 months for all buyers, both investors and first home buyers, and thus we cannot predict that the packages we recommend for sale will be registered.
WHY ARE SDA HOMES MORE EXPENSIVE TO BUILD?
In order to meet stringent requirements under NDIS guidelines, the homes include many features the house next door will not have and thus present as a higher cost to build.
These homes need to have a larger floor plan for ease of mobility, depending on the category of SDA (Robust or High Physical support etc) the homes have to include materials sound enough to withstand damage from wheelchairs or movement etc and thus require stronger materials for floors and walls etc. Some of the categories require full home automation for lights, curtains, windows and doors.
Each build is customised and not cookie cut like most new builds out there built by volume builders. Material is not purchased in bulk as done with volume builders and thus also costs more.
Based on requirements, materials used, customisation, automation, floor plan size etc the cost per square metre in no way can be compared to the new home being built next door.
ARE THESE NEW SDA HOMES OVERPRICED?
The answer is yes and no and maybe, depending on how you view it and who you talk to. Sometimes it is true, however more often than not the issue is that properties are over captalised for a certain area. If you build an $750,000 SDA home in a suburb full of $600,000 homes you will definitely have problems with your valuation being short. Factors which affect the valuations are: the size of the home being too large, or the land price is way too expensive given the demand right now in certain areas, and the fact that these homes may have a lot of special features and that naturally pushes up the cost.
We know of builders who are thinking of doing very high custom builds which aren’t necessary, just because the SDA provider wants the “bells and whistles” plus gold plated toilet seats (kidding!). The problem is that these features push up the cost of the build but make zero difference to its valuation, and as a result the valuations come in lower than expected. We advise investors to allow for a 15-20% discrepancy in the valuation, and thus it is recommended that investors have cash or equity of around $250,000 – $350,000 (for a 20% deposit + valuation shortfall + SDA provider costs + loan repayments during construction). Also, the lender will calculate the serviceability of the investment property based on a market rate of 4%-5% pa rental income, not the expected rental return forecast. This also plays a part in their calculations in valuations because their job is to protect the lender and the mortgage insurer, not the borrower.
HOW IS THE BUILD QUALITY?
There are different builders building NDIS SDA Homes and there is no official building standard. A good builder will provide a quality home which is compliant with current NDIS SDA built to Livable Housing Australia (LHA) standards. It takes around 6 months to build a NDIS SDA approved home (depending on in which State and weather). There are Builder’s warranties provided on structure for 6 years and other build warranties and guarantees as per any other property.
CAN YOU GUARANTEE THAT MY HOME WILL BE SDA APPROVED?
Absolutely yes. This is warranted within your build contract. Both your land and house will meet the standards for the SDA and will be on-boarded into the program. The on-boarding fee is paid at the unconditional phase of your build contract. so that the care provider can begin sourcing tenants ready to move in way in advance, so as to avoid vacancy at handover of the brand new house.
IS THERE A BUILDER’S WARRANTY FOR THE PROPERTY, IF SO, HOW LONG?
Yes, each home is offered a 6-year structural builder’s warranty dated from practical completion. This warranty covers structural items and faults of original workmanship.
IS THERE AN EXPECTED WARRANTY FOR FIXTURES AND FITTINGS?
There is a 12-month maintenance period on build so any maintenance issues or defects that come to light within this period, are the responsibility of the builder to fix and repair, at no additional cost to you. Fixtures and fittings are covered by the manufacturer’s warranty applicable to each item e.g. Oven and cooktop.
IS THE LANDLORD RESPONSIBLE FOR FURNISHING THE PROPERTY?
It would be unlikely that a complete furniture package would be required, as most Tenants would have their own furniture for their bedrooms, but we would suggest there might be some furniture required for the shared spaces. Each home would have different requirements, but we believe an allowance of $5,000 – $10,000 for items like a fridge, washing machine, table and chairs and lounge would be wise.
ARE THERE CURRENT DELAYS IN BUILD TIMES IN 2021?
Yes, the building industry is going through a major challenge at the moment. Raw materials such as timber and steel are in short supply as well as workers for construction sites. This is causing delays in the completion of houses. Construction times which used to take 4-5 months, but are now taking 6-8 months.
HOW HAS THE LACK OF SUPPLIES AND TRADES IMPACTED PRICING FOR BUILDING AN NDIS-SDA HOME??
The cost of building NDIS SDA homes has been steadily increasing during the second quarter of 2021. Timber has gone up by 18%. The cost of builds has been going up 10-15 % and the margin for builders has reduced significantly. The biggest problem is that contracts signed by investors has locked in prices, but the construction of the home will occur over the next year, and increasing costs will cause problems with builders not making money, with building costs going up even after contracts have been signed.
WHAT ARE THE CHALLENGES WITH LAND SUPPLY IN AUSTRALIA AT THE MOMENT?
In South East Queensland, recent internal migration of people from VIC and NSW has resulted in significant population growth – with 10s of thousands moving to South East Queensland in the past 12 months, partly due to Covid. Additionally, more than 400,000 expats returned from overseas since the beginning of the Covid pandemic, buying up property, significantly impacting the available land supply.
In 2020, the government’s Home Builder Grant resulted in lots of First Home Buyers buying a lot of land, which combined with low interest rates resulting in a lack of land supply in the marketplace. In Victoria, land is in very short supply and there is a delay of 1-2 years for land titles. In Brisbane we’re now seeing delays of 6 months or more for land titles.
High demand for house and land packages is creating a fast paced market with new land releases selling out in under a week. Developers now require pre-approval letters, or a broker qualification letter with an EOI. In some cases, larger deposits of $5,000 are now required.
With the influx of owner occupiers in the market, developers are less interested in selling to investors and are favouring direct sales. It is therefore vital to act fast and to always complete everything on the EOI forms to ensure you don’t miss out.
WHAT AREAS ARE YOU PROMOTING FOR SDA?
The areas we have land available at the moment are predominantly in regional centres like Mackay, Toowoomba, Hervey Bay, Townsville. The reason being that land supply in Brisbane, Ipswich and the Gold Coast is very limited. Land developers, nor councils can keep up with approvals of land sites and this imbalance of supply and demand of land will be the case for the next 2 years or so.
If we can get our hands on limited land supply releases during the second half of 2021, that would be great, but we are playing by ear at the moment.
DO YOU HELP WITH SMSF INVESTORS WHO WANT TO BUY NDIS PROPERTY?
SMSF investments in NDIS seems to be a hot topic currently. We are getting a lot of buyers with large amounts in super exploring the idea of NDIS.
Yes we can assist. We can refer clients to SMSF funders who will do one-part contracts for House & Land packages and we help facilitate this as a property advisor only. We recommend SMSF investors have at least 33% of the House & Land contract price, plus additional costs such as stamp duty and holding costs etc. This would amount to over $200,000 as an SMSF balance minimum, ideally at least $300,000.
IS IT ALWAYS POSSIBLE TO HAVE PARTICIPANT LED HOUSE PACKAGES TO CHOOSE FROM?
Participant led strategy basically refers to packages put together by providers and builders which have participants (as tenants) ready for the particular house in the particular area for the package presented. This is the safest way for investors to move forward with an NDIS investment as the provider and tenants are already in place. All that needs to then be done is construction of the house.
This is rare as there are so many buyers who want to purchase a partipant led package and most of the time, investors would need to follow providers into certain areas where they have endorsed the location as a high demand area for participants with SDA funding. This is a provider led strategy.
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