The Top 5 Things to Consider Before Investing in NDIS Housing
NDIS housing, under the umbrella of the National Disability Insurance Scheme (NDIS), is a pivotal initiative by the Australian Government introduced in 2016 to enhance the well-being of disabled Australians. Currently, the government estimates that around 5.5 million Australians live with a disability.
One key component of the NDIS is the Specialist Disability Accommodation (SDA) programme. SDA housing is property specifically designed to accommodate individuals with high support needs or extreme functional impairment.
Unfortunately, there is a severe shortage of suitable accommodation in some areas, so there is a significant demand for more suitable dwellings. As a result, the government has appealed to private investors by offering higher-than-average market rents and long tenancy periods.
While there are several hoops to jump through to own an NDIS property, the current high returns could make this a great NDIS housing investment option for property investors.
But as with any property investment opportunity, there is a range of things you need to know before committing to an NDIS housing investment. To help inform your decision, here are the top five things you should consider.
1. Investing in Specialist Disability Accommodation Also Requires Due Diligence
While NDIS properties are in high demand and offer great returns on paper, it is important to remember that any investment carries risk, and you should always carry out due diligence before making any decisions.
Beyond the traditional due diligence steps, such as getting pre-approved for a home loan, conducting inspections, and ensuring sufficient cash flow to sustain your lifestyle and investment, it is essential to understand the special requirements that must be met for the NDIS property to be certified.
You will also need to do your research to ensure that you are buying in an area with a strong demand for this type of accommodation. This could be an area with a low supply of NDIS-compliant properties or a high concentration of NDIS participants.
To take it one step further, you’ll also need to consider the challenges the specific tenants in that area face in finding suitable accommodation. By taking the time to assess each tenant’s specific needs, you can ensure that your property is best suited to their individual requirements.
For example, someone with a physical disability may need wider doorways and hallways to accommodate a wheelchair, while someone with a cognitive impairment may benefit from having clear signage and well-lit rooms.
As the industry is subject to government regulation, review, and funding, it needs to be constantly monitored for any changes that may impact the outcomes.
All of this means that you’ll need to invest more upfront costs compared to building or renovating standard investment properties. So, you’ll have to account for this when working out if this is a financially feasible investment in light of your circumstances and investment objectives.
2. There are Several Ways You Can Purchase an SDA Property
The first way to invest in SDA properties is to modify a traditional property to meet the necessary standards. This is probably the most complex option out of the three, but there are building contractors and architects who offer specialised services for modifying homes to meet the SDA standards.
There are also SDA advisory organisations that can guide you on the way forward to ensure that you’re taking all the right steps.
So, if you have an existing property in an area where NDIS properties are needed and the funds to renovate or modify it, this may be the best option.
The second option is to purchase approved SDA housing that is already built and equipped to house NDIS participants. You can use an SDA provider and specialist real estate agent to help you source properties, but unfortunately, the supply is relatively low for existing properties. Therefore, you may struggle to find the right property.
The third and most common option is to purchase a house and land package specifically designed as an SDA property. This option is likely to be the most hassle-free way to purchase an SDA property, but there is a desperate need for newly built properties because the existing supply of NDIS housing is low. Always do your research and due diligence before investing
3. Each NDIS Property Investment Must Meet Certain SDA Provider Standards
The purpose of the NDIS SDA property programme is to provide safe and attractive housing options for people with disabilities, promoting more independent living arrangements. So, the SDA standards aim to improve liveability for residents by ensuring that the accommodation is fit for purpose and meets their specific needs.
For example, SDA standards require that these properties be accessible and have enough space to accommodate wheelchair users, as well as features such as level entryways, wide doorways, and accessible power outlets. All kitchen appliances must also be accessible regardless of whether the resident is seated or standing.
Moreover, SDA standards require the properties to be more robust than conventional properties, reducing the likelihood of reactive maintenance. This means that NDIS participants can be confident that their homes will not require significant repairs or replacements in the near future.
And lastly, to enrol in the NDIS, each dwelling must meet certification standards. You can access most of the requirements and obligations for SDA in the NDIS (Specialist Disability Accommodation) Rules 2021 (SDA Rules).
4. SDA Funding is Attached to the National Disability Insurance Scheme Participant, Not the Property
While NDIS compliance is an important step in becoming eligible for SDA funding, it is not the only requirement.
To receive SDA payments from NDIS service providers, you must have an approved NDIS participant who is willing to rent your property. Without a tenant, you will not be able to receive any funding, no matter how compliant your property may be.
This is because the SDA funding serves to help cover the costs of care and support for people with disabilities, not to subsidise landlords who have built specialised housing for disabled people.
In other words, the process is essentially the same as securing a tenant for an ordinary investment property—unless you can find a tenant for your SDA-compliant property, you won’t see rental returns.
5. Your NDIS Investment Property Has Tax Implications
Like any other investment property, you’ll be required to pay income tax on the rental income you generate from your SDA dwelling. In the same breath, however, you’ll also have access to the various investment property tax deductions such as depreciation, rental expenses, and interest on your mortgage.
It’s worth noting that, as building costs are higher and plant and equipment requirements are greater, you’re likely to be able to claim higher depreciation deductions compared to a traditional investment property. So, make sure to get your hands on a tax depreciation schedule from a qualified quantity surveyor to ensure you’re getting the most out of your tax deductions.
Key Takeaways
The NDIS is a government initiative that provides support for people with disabilities. One of the main ways it does this is by providing funding for accommodation and care services. This has created a growing market for NDIS-compliant properties, which are purpose-built to meet the needs of people with disabilities.
For new investors, SDA properties can be an excellent way to get started in the property market. They can provide a sound foundation for a successful investing future with careful planning and research. But as with any investment, you must stay on top of your tax implications.
At Property Tax Specialists, our team of experts can help you structure your property ownership to minimise tax liabilities legally, and we can advise you on the best way to protect your assets.
Contact us today to find out more about how we can help you achieve your goals and enter the NDIS market.
FAQs
What is a Specialist Disability Accommodation (SDA) House?
An NDIS house, more accurately referred to as Specialist Disability Accommodation (SDA), is a type of housing designed for people with extreme functional impairment or very high support needs. These homes are specifically constructed to be more accessible and enable better or safer delivery of support for NDIS participants.
SDA can come in various forms, including apartments, villas, townhouses, houses, or group homes. They are typically shared accommodations, housing a small number of residents, although in some cases, individuals may live alone if it best meets their needs. It’s important to note that SDA funding covers the cost of the building itself, not the support services provided within it.
Can You Claim Accommodation on NDIS?
Generally, the NDIS does not cover standard accommodation costs like rent, groceries, or utilities for most participants. However, there are specific circumstances where the NDIS may fund accommodation-related support.
For example, the NDIS can fund home modifications to make a participant’s existing home more accessible. In rare cases (about 6% of participants), the NDIS may fund Specialist Disability Accommodation (SDA) for those with extreme functional impairment or very high support needs. Additionally, the NDIS may fund Supported Independent Living (SIL), which provides assistance with daily tasks in a participant’s home. It’s crucial to note that these supports are typically reserved for those with the highest needs and are not universally available to all NDIS participants.
Is an NDIS Home a Good Investment?
Investing in an NDIS home, particularly Specialist Disability Accommodation (SDA), can potentially be a lucrative investment opportunity, but it comes with unique considerations. Purchasing an SDA investment property can yield strong rental returns while supporting NDIS participants.
The government offers higher-than-average market rents and long tenancy periods for SDA properties to address the severe shortage of suitable accommodation for people with disabilities.
The structured process for investing in SDA properties includes financial assessments, property selection criteria, and collaboration with builders and NDIS service providers to ensure successful tenant placements and positive cash flow.
However, investing in SDA requires adherence to specific standards and regulations, which can involve higher upfront costs and ongoing compliance requirements.
You must conduct thorough due diligence, including researching areas with high demand for NDIS-compliant properties and understanding the specific needs of potential tenants. While the returns can be attractive, investors should be aware that funding is tied to NDIS participants, not the property itself, meaning without an eligible tenant, no funding will be received. Also government funding can change impacting the investment performance.
As with any investment, it’s essential to weigh the potential returns against the risks and requirements carefully.
Are There Tax Implications for NDIS Property Investment?
Yes, like any other investment property, you’ll need to pay income tax on the rental income from your NDIS tenants. However, due to the higher building costs and equipment requirements of NDIS properties, you might be eligible for higher depreciation deductions compared to traditional investment properties.
Disclaimer
Please note that every effort has been made to ensure that the information provided in this guide is accurate. You should note, however, that the information is intended as a guide only, providing an overview of general information available to property buyers and investors. This guide is not intended to be an exhaustive source of information and should not be seen to constitute legal, tax or investment advice. You should, where necessary, seek your own advice for any legal, tax or investment issues raised in your affairs.
