The Things You Should Know About an NDIS SDA Property Investment
The National Disability Insurance Scheme (NDIS) is a program administered by the Australian Government, initiated in 2016 to enhance the well-being of people with disability. Presently, government estimates indicate that approximately 4.4 million Australians are living with disabilities.
A crucial component of the NDIS is the Specialist Disability Accommodation (SDA) program, which pertains to housing specifically designed to cater to individuals with high support needs or functional impairments. Regrettably, there exists a significant shortage of suitable SDA housing, leading to a substantial demand for the creation of more appropriate residences. Consequently, the government has incentivized private investors by offering rents higher than the average market rates and extended tenancy periods.
Although acquiring an NDIS SDA property involves navigating certain requirements, the potential for elevated returns makes it an enticing investment opportunity for property investors. However, like any property investment, there are essential considerations to ponder before committing to an NDIS property investment. To assist you in making an informed decision, here are the top five factors to contemplate.
Investing In Specialist Disability Accommodation Requires The Same Amount of Due Diligence as Other Real Estate Investing
While NDIS properties may appear highly lucrative on paper, it’s crucial to bear in mind that every investment carries inherent risks. Therefore, it is imperative to conduct thorough research and due diligence before making any investment decisions.
In addition to conventional due diligence measures, such as securing pre-approval for a home loan, conducting property inspections, and ensuring sufficient cash flow to support both your lifestyle and the investment, it is equally vital to comprehend the unique prerequisites necessary for NDIS property certification.
Furthermore, it is essential to investigate the demand dynamics in the area where you plan to invest. This entails assessing whether there is a scarcity of NDIS-compliant properties or a significant concentration of NDIS participants in that locality.
Taking your diligence a step further, it is also advisable to consider the specific challenges faced by potential tenants in the area when seeking suitable accommodations. By dedicating time to understand the unique needs of each tenant, you can ensure that your property aligns optimally with their individual requirements.
There are Several Ways You Can Purchase an SDA Property
The initial approach involves modifying a conventional property to meet the necessary SDA standards. While this is the most intricate option among the three, there are specialized building contractors and architects available who offer tailored services for adapting homes to SDA requirements. Additionally, SDA advisory organizations can provide valuable guidance to ensure you follow the correct steps. If you own an existing property in an area where NDIS (National Disability Insurance Scheme) properties are in demand and have the financial resources for renovations or modifications, this might be your best choice.
The second option is to purchase pre-approved SDA housing that is already constructed and equipped to accommodate NDIS participants. You can enlist the assistance of an SDA provider and a specialized real estate agent to help you locate these properties. However, it’s worth noting that the availability of existing SDA properties is relatively limited, making it a potential challenge to find the ideal property.
The third and most commonly pursued option is to acquire a house and land package specifically designed as an SDA property. Opting for this choice is typically the most hassle-free way to invest in an SDA property, as there is a significant demand for newly built properties due to the scarcity of existing NDIS housing.
Each NDIS Property Investment Must Meet Certain SDA Standards
The NDIS SDA property program’s primary objective is to offer secure and appealing housing choices for individuals with disabilities. Consequently, the SDA standards are designed to enhance the quality of life for residents by guaranteeing that the housing is suitable for their requirements and tailored to their unique needs.
As an illustration, SDA standards mandate that these attributes should be easily reachable and spacious enough to cater to individuals using wheelchairs. This includes provisions for level entryways, wide doorways, and accessible power outlets. Moreover, all kitchen appliances must be conveniently reachable, regardless of whether the resident is in a seated or standing position.
Furthermore, SDA standards necessitate properties to exhibit greater durability compared to typical dwellings, thereby diminishing the probability of reactive maintenance. This assurance assures NDIS participants that their residences won’t necessitate substantial repairs or replacements in the foreseeable future.
Finally, it’s essential to note that to qualify for enrollment in the NDIS, each dwelling must adhere to certification standards. Most of the prerequisites and responsibilities for SDA can be found in the NDIS (Specialist Disability Accommodation) Rules 2021 (SDA Rules).
Funding Is Attached to the National Disability Insurance Scheme Participant, Not the Property
While achieving NDIS compliance represents a crucial step towards qualifying for SDA funding, it should be noted that meeting this criterion alone is insufficient. To become eligible for SDA payments through NDIS service providers, it is imperative to secure an approved NDIS participant who is willing to rent your property. The presence of a tenant is a fundamental prerequisite, and without one, you will not be eligible for funding, regardless of the extent to which your property complies with NDIS standards.
This requirement is rooted in the primary purpose of SDA funding, which is to financially support the costs associated with caring for and assisting individuals with disabilities, rather than serving as a subsidy for landlords who have developed specialized housing for this demographic.
In simpler terms, the process of securing a tenant for your SDA-compliant property is akin to finding a tenant for a standard investment property. Without a tenant, you won’t generate any rental income, no matter how well your property aligns with NDIS compliance standards.
Your NDIS Investment Has Tax Implications
Similar to any other investment property, you will need to fulfill your income tax obligations for the rental income generated by your NDIS tenants. Nevertheless, you will also have the opportunity to benefit from various tax deductions associated with investment properties, including depreciation, rental expenses, and mortgage interest.
It’s important to highlight that due to elevated construction costs and increased plant and equipment demands, you are likely to be eligible for more substantial depreciation deductions in comparison to a standard investment property. Therefore, it is advisable to obtain a tax depreciation schedule from a certified quantity surveyor to maximize your tax deductions effectively.
The NDIS, a government program aimed at assisting individuals with disabilities, primarily offers financial aid for housing and caregiving services. Consequently, a burgeoning niche has emerged in the real estate market focused on constructing properties that adhere to NDIS standards, designed to cater to the specific requirements of people with disabilities.
For those new to the world of investment, Special Disability Accommodation (SDA) properties represent a promising entry point into the real estate market. By conducting thorough research and thoughtful planning, SDA properties can serve as a sturdy cornerstone for a successful investment journey. Nonetheless, akin to all investments, it is essential to remain vigilant regarding tax implications.
Contact us today at invest@philipsgroup.com.au or 0403 803 470 to find out more about how we can help you achieve your goals and enter the NDIS market.