What Should You Know with NDIS Investment Properties?

With higher interest rates eroding yields in traditional rental properties, investors are starting to explore higher yields strategies.

NDIS investment properties have been a rather attractive proposition lately, due to its higher and stable yield. However, as with any investments, there are benefits and there are risks. What do you need to understand and weigh the benefits and disadvantages of the investment, before you get into one?

In this article, we will cover the topic of NDIS investment properties, how it works, what you need to know and what you need to watch out for.

What is NDIS?

NDIS is the acronym for National Disability Insurance Scheme. This is an Australian government initiative that provides support and services to people with disabilities, their families, and caregivers. NDIS aims to provide individuals with disabilities greater control over their lives and the support they receive. It provides funding for a range of services, and supports tailored to the needs of each individual. These can include things like therapy, assistive technology, personal care, and more. It also includes funding for accommodations for people living with various assisted living needs.

What is NDIS property?

NDIS property is a property which is used for the purpose of providing accommodations for recipients of the NDIS allowance. These properties have been designed and must be compliant with the requirements of Specialist Disability Accommodation (SDA) standards.

What is a NDIS SDA property?

A NDIS SDA property is a property which meets and is compliant with the requirements of Specialist Disability Accommodation (SDA) standards.

What are the benefits of investing NDIS properties?

NDIS properties has been getting a lot of attention recently, due to the high interest rates, making all other investment properties look unattractive. Benefits of investing in NDIS properties includes:

1. Steady Rental Income: NDIS properties are often leased to NDIS recipients, and the rent is usually funded through the NDIS. This can provide investors with a reliable and steady rental income stream, as the demand for housing that meets the needs of people with disabilities remains relatively constant.

2. Long-Term Tenants: NDIS participants often require stable, long-term housing solutions. As a result, NDIS properties may have lower turnover rates compared to standard rental properties, reducing the vacancy risk for investors.

3. Government Support: NDIS is a government-funded program, and properties leased to NDIS participants often receive rental payments directly from the NDIS. This government support can provide investors with a sense of security and stability.

4. Ethical and Social Impact: Investing in NDIS properties allows investors to contribute to providing suitable and accessible housing for individuals with disabilities. This can have a positive social impact and align with ethical investment goals. Some investors sees this a giving out "good karma".

5. Potential for Capital Growth: NDIS SDA properties are rather niche, and we aren't great fans of niche investment strategies. However, depending on location and market conditions, NDIS properties may still appreciate in value over time. This could offer potential capital growth for investors.

How is NDIS property providing high yield and high returns?

As above, NDIS is a government funded program, and occupants usually require long term accommodations.

What do you need to know about NDIS properties before investing in one?

it's important to conduct thorough research and due diligence before making any investment decisions. Here are some key considerations to keep in mind:

1. Understand the NDIS: Familiarize yourself with the National Disability Insurance Scheme (NDIS), its goals, eligibility criteria, and how it operates. Understand the role of NDIS properties in providing housing for NDIS participants and the rental payment structure.

2. Regulations and Compliance: NDIS properties need to meet specific accessibility and accommodation standards to cater to the needs of people with disabilities. Understand the regulations and standards related to accessible housing and ensure that the properties you're considering are compliant. There will also be rigorous compliance audits, to ensure the service providers and properties are compliant with the required standards.

3. Location: Just like any real estate investment, location is crucial. Consider the demand for NDIS properties in the chosen area. Proximity to essential services, medical facilities, public transportation, and NDIS service providers can impact the property's desirability.

4. Property Management: Research property management options. You might consider partnering with disability service providers or property management companies experienced in managing NDIS properties. A capable property manager can handle tenant needs, maintenance, and compliance effectively.

5. Rental Income and Cash Flow: Understand the rental income structure and payment process. Analyze the potential cash flow, factoring in expenses such as property management fees, maintenance, insurance, and potential vacancies.

6. Maintenance Costs: Depending on the needs of the occupants in the accommodations, you may sometimes find that there are higher modification and maintenance costs associated with providing these accommodations.

7. Lease Terms: Learn about the typical lease terms for NDIS properties. Longer lease agreements with NDIS participants can provide stability, but also consider the flexibility (or the lack of) to make changes if needed.

8. Due Diligence: Thoroughly inspect the properties you're considering. Ensure they meet the required accessibility standards and assess any potential renovation or modification costs. If you are buying an established property, chances, it will need modifications to be compliant. These modifications can be rather extensive.

9. Market Research: Analyze the local real estate market trends. Are property values appreciating, and is there a demand for accessible housing in the area?

10. Ethical Considerations: NDIS properties have a social impact. Understand the ethical implications of your investment and align it with your values. Consider also, the social impact when you stop providing for NDIS.

11. Exit Strategy: Consider your exit strategy. How easily can you sell or transition the property if your investment goals change? As NDIS properties are niche property types,

12. Documentation: Review all contracts, agreements, and lease documents thoroughly. Ensure you understand your responsibilities and the terms of the lease, your responsibilities as a NDIS accommodation provider.

13. Financial Planning: Assess how investing in NDIS properties aligns with your overall financial goals, risk tolerance, and investment strategy.

How do you find one NDIS property?

If you are interested in NDIS properties, we have specialist builders who can have NDIS compliant floorplan which they can build. Get in touch with us, to get more information.

What are the risks of NDIS properties?

Like any investment, there are risks that you should be aware of. Here are some potential risks associated with investing in NDIS properties:

1. Regulatory Changes: Government policies and regulations related to the NDIS can change over time. Changes in funding, eligibility criteria, or housing requirements will impact the profitability and viability of NDIS properties.

2. Dependency on Government Funding: NDIS properties often rely on government funding for rental income. Changes in funding levels, requirements, restrictions, or delays in payments could affect your cash flow.

3. NDIS Eligibility Rules Changes: It is not unheard of that NDIS requirements and eligibility rules do change often. More often than not, these rules are made more stringent as the government tries to control of cost blowout of NDIS program. Funding to eligible participants can be cut with little warning. If this happens to a participant/occupant in your NDIS property, you are exposed to higher vacancy rates.

4. Tenant Turnover:  While NDIS participants often seek long-term housing, tenant turnover can still occur. Finding new qualified tenants can take a considerably much longer time, and preparing the property for new occupants can incur costs.

5. Vacancy Risk: While NDIS properties may have lower vacancy rates due to stable, long-term leases, vacancies can still occur. Because of the strict qualification requirements of a occupant, it tends to take a much longer time to fill a vacancy. When the property remains vacant for a significant period, it could impact your rental income.

6. Maintenance and Repairs: NDIS properties must be compliant to accessibility standards, which may involve higher maintenance and modification costs. Ensuring that the property remains compliant and suitable for tenants with disabilities can increase maintenance expenses. NDIS properties also tends to suffer from higher repair costs due to higher wear and tear and damages.

7. Market Demand: Due to the niche nature of providing such accommodations, the demand for NDIS properties can vary quickly. If you invest in an area with limited demand for disability-specific housing, you might struggle to find suitable tenants. It is quite common to find that the addition of one new NDIS provider can significant change the dynamics of the market demands.
   

8. Capital Appreciation: While some NDIS properties might appreciate in value, this isn't guaranteed. Factors like the local real estate market, economic conditions, and demand for disability housing can influence property values.

9. Property Management Challenges: Managing NDIS properties can involve unique challenges, such as coordinating with disability service providers, ensuring accessibility features are maintained, and addressing tenant-specific needs.

10. Ethical and Moral Considerations: Investing in NDIS properties carries ethical considerations due to its social impact. It is no longer just your business. Balancing

11. Liquidity: Selling an NDIS property might take longer due to its specialized nature and the need to find buyers interested in this type of investment.

12. Resale Challenges: NDIS properties are specialist properties. Potential buyers for NDIS properties might be limited to investors familiar with the specific market. This could affect your ability to exit the investment quickly or at the desired price.

13. Market Saturation: If a particular area experiences an influx of NDIS properties, it could lead to oversaturation and increased competition for tenants. It is not uncommon, that the addition of a single new NDIS property can saturate the market and significantly affect the yield and vacancy.

14. Economic Downturns: Economic downturns can affect the NDIS program's funding and tenants' ability to pay rent. This could impact your rental income.

15. Unexpected Costs: There might be unforeseen costs associated with modifications, renovations, compliance updates, or legal issues.

It is, therefore, critical to thoroughly research and assess these risks before investing in NDIS properties. Working with professionals who have expertise in real estate, disability housing, and financial planning can help you make informed decisions that align with your investment goals and risk tolerance.

Remember that diversification, due diligence, and ongoing monitoring are essential practices for managing investment risks.

How do you sell one NDIS property?

Selling your NDIS property is very similar to selling a standard home. You estimate the value, list it, and sell it. However, because NDIS property provide social and ethical benefits to the society and occupants, you will need to consider the impact on the occupants. As a specialist and niche property, there is not going to be a lot of buyers who are familiar with the NDIS property, and most would stay away from buying a NDIS property due to their unfamiliarity. Selling an NDIS property is a topic in itself, and we will cover this in a future article.

Can you use any property as NDIS property?

Not every property can be used as an NDIS property. NDIS properties are specifically designed and adapted to meet the accessibility and accommodation needs of people with disabilities. The properties are intended to provide a safe, comfortable, and accessible living environment for individuals who may have mobility challenges, sensory impairments, or other disabilities.

To be suitable as an NDIS property, a property typically needs to meet certain requirements, including:

1. Accessibility Standards: NDIS properties must adhere to accessibility standards that ensure the property is usable by people with various types of disabilities. This includes features such as ramps, widened doorways, grab bars, and accessible bathrooms.

2. Safety Features: NDIS properties may need additional safety features to accommodate the specific needs of individuals with disabilities. This could involve modifications to lighting, flooring, and other elements to enhance safety.

3. Adaptations: The property might require adaptations based on the specific needs of potential tenants. For example, if the property is intended for individuals with mobility challenges, it might need modifications like stairlifts or wheelchair ramps.

4. Location: Consider the location of the property. It should be in proximity to essential services, medical facilities, public transportation, and other amenities that are important for individuals with disabilities.

5. Compliance: The property must comply with any relevant building codes, accessibility regulations, and standards for disability accommodations.

6. Consultation: When considering a property for NDIS use, consulting with disability service providers or experts in accessible housing can help you assess whether the property can be effectively adapted to meet the needs of NDIS participants.

It's important to note that there might be local regulations and guidelines that dictate the specific requirements for NDIS properties in your region. Additionally, working with experienced professionals in real estate, accessibility, and disability services can help ensure that a property is suitable and compliant for NDIS use.

Before considering a property for use as an NDIS property, it's advisable to research the regulations in your area, understand the specific needs of potential tenants, and consult with experts to determine if the property can be effectively adapted to meet NDIS standards.

Where can you find a NDIS property?

Most of the new NDIS properties are custom build to SDA standards. It is cheaper and more efficient to incorporate the SDA requirements from the start of the build process. If you have trouble looking for NDIS properties, Concierge Buyers Advocates has a custom search service, which can find the land and/or builder for your NDIS property.

Get in touch to find out more.