NDIS Property Investment: The Benefits and Pitfalls to Avoid
The potential benefits of investing in property draw many Australians to buy an investment property. The property market in Australia has experienced rapid growth over the past few years. In particular, the introduction of Specialist Disability Accommodation (SDA) under the National Disability Insurance Scheme (NDIS) has piqued the interest of savvy and socially-focused investors in Australia.
With government-backed SDA funding and the opportunity to make a meaningful difference in the life of an Australian with disability, the potential benefits of NDIS property investment are undeniable. In this article, we unpack the potential benefits and pitfalls in more detail.
What is NDIS property investing?
Investing in NDIS property refers to private investors purchasing specialist disability accommodation properties. The SDA scheme was introduced to address the severe lack of suitable accommodation to support the very high support needs of Australians with extreme functional impairment. SDA properties are purpose-built across four design categories, with the necessary provision to support tenants with significant disability.
The potential benefits of investing in property under the NDIS
Here are some of the potential benefits of owning an NDIS investment property:
There is a growing demand for NDIS-approved properties as more NDIS participants seek suitable accommodation. Finding tenants is made easier for property owners through NDIS service providers and SDA demand data maps.
Stable rental income
Investing in such properties can potentially offer a stable and consistent rental income stream, as the properties are typically built to home several participants (generally 2-4). The tenancy structure is such that each individual tenant has a separate tenant agreement, meaning that even if one tenant vacates the property, the remaining tenancies stay in place.
Additionally, the government supports private investment in the NDIS scheme through SDA funding. SDA funding is built into an NDIS participant’s NDIS plan, with the structure also including the requirement for tenants to make a reasonable rent contribution. The funding model provides the opportunity for strong rental yields that are potentially higher than average market rents.
NDIS participants often require long-term accommodation solutions; commonly, they find their ‘forever homes’ in SDA dwellings. Therefore, investing in NDIS properties can lead to longer tenancy agreements, reducing vacancies and providing greater financial security.
Positive social impact
Not only does NDIS property investment allow you to contribute to providing essential housing and support for people with disability (enhancing their quality of life), but some of the greater positive social impacts include inclusivity and social integration, empowerment, greater independence for the tenants, reducing pressure on families and aged care facilities.
Potential for capital growth
Like any other investment property in the residential or commercial property market, SDA properties hold the potential for capital appreciation over time, depending on location and market conditions.
Opportunity for tax deductions
Generally, expenses associated with investments are able to be deducted from the income they generate. As an SDA investor, you may be able to reduce your taxable income from the property with the expenses associated with it, such as rates and council fees, maintenance costs, property management fees or interest on an investment mortgage. The Australian Taxation Office (ATO) is one of the best sources of information for tax deductibility of investments in Australia.
The potential pitfalls of buying an NDIS investment property
Just as is true for all investment options, there are potential pitfalls to consider before investing in an NDIS property.
Specialist property management
Specialised housing requires specialised property management firms. This means that your property management options may be more limited than on the residential market, or if you have an existing property portfolio, your existing property managers may not be able to take care of your SDA property.
The demand for NDIS properties is significant, however, it is possible to saturate a location with too many of the same dwelling type or design category. An oversaturated market can not only increase vacancy risk and increase competition, but it can also preclude some NDIS participants from accessing the correct accommodation type.
Standard landlord insurance may not cover specific NDIS-related issues, therefore, to adequately insure your SDA property, you may need to seek specialist landlord or building insurance.
Regulatory compliance obligations
Understandably, NDIS properties are bound to strict legislation that evolves over time. Not only are there additional compliance regulations to adhere to with new build SDA dwellings, but there are also NDIS specific compliance obligations. For example, only a registered SDA provider can offer a property to the SDA market. Ensuring that your property is SDA compliant is paramount to securing the ongoing success of your investment for both yourself and every NDIS participant that lives within it.
The process for funding, building, buying and managing an SDA property is unlike any other. Property investors may not be familiar with all of the requirements or costs involved in buying property under the NDIS.
Access specialists in NDIS property investment
At Apollo Investment, our industry experts streamline the process of investing in an NDIS/SDA property, eliminating the need to take on all of the research yourself, reducing any guesswork and taking over the time-consuming tasks. This helps you lower your risk of non-compliance with a greater chance of success than going it alone. With our simple and unique approach, explained by our knowledgeable team, we are confident that you will master NDIS property investment to make a real difference to both your property portfolio and the Australian community.
Talk to our team today to learn more about investing in specialist disability accommodation.