Cheap SDA Properties - Some have Tenants, Temporarily.

Discussion in 'NRAS & NDIS SDA' started by RPI, 23rd Feb, 2021.

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  1. RPI

    RPI SDA Provider, Town Planner, Former Property Lawyer

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    Edit: After yet again talking to people moving out of near new properties and into ours below is a bit of a rant about my frustration. If you are thinking about investing in cheap SDA then worth a read, otherwise its probably not.

    see so many crappy cheap SDA Properties, mostly being sold by sales people who want their clip and don't care about the ongoing, eg 3 Bed High Physical Support House & Land for under $600k. It costs almost that to build a 3 bed HPS house (and we don't get kickbacks that the sales guys are getting).

    I know that quite a lot of these dodgy place have tenants, that's because I get to go inside them to meet my future tenants that are moving out of them. These little future slums are better than the rubbish people are living in now, but there are more and better options being built all the time.

    We are in Cairns talking to people who are moving out of their 6 month old SDA to move into ours. Have done the same in all over the place and do so all the time. They just don't work, they are not big enough, they don't have the tech and people have spent far too little on them for the return they are getting (for now). They are simply not fit for purpose. The numbers look good on paper but in a couple of years when the house is empty the numbers are going to remain on paper.

    It costs the same for the tenant to live in a cheap crappy place as it does to live in a great one. They do and will move. It is a painful process for a participant to get SDA in their plan, it is exceedingly simple for them to change houses afterwards. I have just passed 30 people living in existing SDA that are waiting for one of mine to be finished, that's new people, we already have multiple people who were living elsewhere and already moved into ours. Primarily these people are coming from some of the biggest, or at least the most advertised SDA providers.

    We have no issue with people going with other providers, but decent ones. The more crappy SDA people build the more people are just living in prettier, newer crappy houses. With the returns people get there is just no need to build rubbish. On top of that, the empty SDA's in a few years are not going to help investors get finance to build real ones because the banks and valuers put them in the same boat as the SDA that actually work.

    At the moment we have more than 80 buildings in our pipeline waiting for something to occur to start construction (eg BA issued, build quoted etc). We always need more nice people who are happy to help people into places they call home while getting a great return, but that's not what this post is about. If people are building great SDA then the more the better. Just don't build minimum standard rubbish.
     
  2. Connor

    Connor Well-Known Member

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    As a general example, what would a minimum sized bedroom be as opposed to a real life workable size?

    I've also noticed many NDIS buildings plans showing 1020 wide doorways, but damn it wouldn't be easy to drive a chair through that.... I would of assumed it would be 1200 minimum..
     
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  3. RPI

    RPI SDA Provider, Town Planner, Former Property Lawyer

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    Connor you are spot on. 1200mm doors, 1500mm hallways. Drive a chair with your chin and get it through a 1020 door is not easy. Bedroom wise 1500mm on 3 sides of a queen bed is ideal, sometimes we have to reduce the less active side by a couple of hundred mill but only if necessary for great site. I think 1000m is the minimum. LHA standard was worse than SDA. Our HPS bedroom + ensuite is 30-36m2.
     
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  4. Connor

    Connor Well-Known Member

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    Thanks RPI, that makes alot of sense. I had a look at the regs just before. Those minimums for a bedroom are ridiculously small. 1000mm on 2 sides of a queen bed is 'acceptable', as long as the 3rd side allows 1500mm..... Now i'm no expert on this, but for a HPS participant, it's simply unworkable...
    I just saw an example of this where the 1500mm side was at the foot of the bed, with only 1000m on both access sides. How on earth do they expect a HPS participant to enter/exit the bed from the foot?
     
  5. RPI

    RPI SDA Provider, Town Planner, Former Property Lawyer

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    Exactly or turn a power chair that is over 1m long. But to be able to sell a HPS for under $600k they have to cut corners. That price makes the theoretical return percentage absurd, but the actual return $0.
     
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  6. Mark Gibson

    Mark Gibson New Member

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    RPI, we are keen to invest in something that helps get people out of aged care rooms and provides a decent return, but finding difficulty with:
    a) assessing the level of vacancy risk involved - demand seems limited (SDA data spreadsheet Dec 20) when compared to supply (Gonest.com shows 189 vacancies in Brisbane/Gold coast area)?
    b) Assessing valuation/regulation risks - these properties cost significantly more to purchase (one I am researching vals at $800k if NDIS tenanted, $280k if in the 'normal' rental market). I understand the additional build/certification costs involved, but if Government decides to change SDA eligibility criteria or reduces the SDA prices as demand is absorbed and budget pressures mount, or the SDA market becomes flooded and participants exercise their choice and move out for newer, shinier offerings as the market matures, investors could be left holding a very expensive white elephant?
    c) deciding who to partner with for a quality turnkey solution, preferably for an SMSF?
    d) Obtaining finance - are you aware of brokers/lenders who operate in this space?

    You seem an authority in this space, I would appreciate your comments on these questions.
    Cheers,
    Mark
     
  7. RPI

    RPI SDA Provider, Town Planner, Former Property Lawyer

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    A). There is hardly any decent stuff being built if it is vacant permanently then it is because it is not fit for purpose. Some are slower to take up because it is an area where the support coordinators and NDIA are new to SDA. The first in an area can take some.months to fill up if the SC/NDIA office are slow. Most of the stuff on nest are fairy tales, not yet built.

    B) During the current build window then payments a re locked in. But choice and control is a good thing. So buy one in best location with best ditou/fit for purpose. Most don't spend the money to do so. That seems drastic difference between two. Like lannd value only at $290

    C) stay way from former NRAS sales type providers. Look for someone in for long term about management and vacamcy. Not just for their sales comms.

    D) Some valuers get it some have been burnt by looking at or investing themselves in rubbish SDA. Most 2nd tiers will find build, most first tiers will refinance that.
     
  8. See Change

    See Change Well-Known Member

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    reality is the stats available don’t accurately reflect the position on the ground . To do that you need to talk to people on the ground or to someone who is talking to them

    We went to a meetup in Newcastle Pre Covid which involved around 50 groups working in NDIS .

    According to the stats there were vacant places in the hunter area , but according to everyone we talked to there was a shortage of Suitable properties .

    there were various reasons for this . The NSW government had put out a contract to build a whole pile of properties to move a large number of residents out of local institutions . They were all 5 bedroom houses . Very few actually had 5 residents so the stats show vacant rooms . It’s hard enough getting 5 compatible people in a normal share house but when that is a permanent and those people have disablities including various behavioural problems or just different personalities it becomes next to impossible .

    Imagine being a quad , intellectually normal , but totally dependant of carers for everything . Would you want to in a house with a motor bike accident head injury patient who’s only utterance is , f ff fu fu ****.

    That’s just one factor on why the online stats don’t reflect what is happening on the ground .

    People are already getting burnt by building properties that are inappropriate .

    We talked to one person who was building 3 bedroom Robust properties.

    The most important thing is dealing with someone who is honest and in the industry for the right reasons , not the slickest salesmen .

    New industry , new people working in a new industry and it takes time to up skill everyone , expand the team etc

    You don’t want someone who’s main motivation is to sell you a house .

    You’re buying a long term relationship and if you don’t trust the other person or aren’t sure you shouldn’t be going with them . And it works both ways . The good people working in this space are doing it for the right reason . They don’t want to work with investors who want to cut corners so they can make a better return when the returns are already good.

    You will pay for the Due dilligance they’ve been doing and the intellectual property they’ve developed .

    some people think they can do it on their own , but there are so many pieces in place it’s impossible to watch it all . You’d only go this way if you have lots of time and personal involvement .

    I probably know more than most . I’m a GP and have worked rehabilitation and have seen what happens when young disabled people end up in nursing homes ( MBA victim I mentioned above , and an elite level pro sportsman , quad from neck injury ....) I have a friend with deep pockets who has an eligible child . I also have a patient who is eligible and is planing on buying his houso property and building his own to live in.

    My take is NDIS is for sophisticated investors who are capable of doing their own research . It’s complicated , there’s incomplete information available , it’s a new industry and you need deep pockets

    bottom line , if you need convincing to do it , you shouldn’t be doing it .


    cliff
     
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  9. Piston_Broke

    Piston_Broke Well-Known Member

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    It's a spruikers paradise.
    All vague information, "Call us for more info", from allmost that I've seen.
    "want to work with us? Send your email".
    It's like the SEQ spruikers of the 90s, or the get rich websites where you have to go through 10 steps to get to the actual information.
    Only one website seems to have actual prices for htese properties.
     
  10. RPI

    RPI SDA Provider, Town Planner, Former Property Lawyer

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    Yep this space is filled with so many dodgy sales people. We refuse to join one of the industry associations because we don't want to be associated with its members. If we go to one of the tenant provider connections we sit there, look around the room and wonder if it's worth being in the same place as many of them. But then we meet more participants we can help. And for tenant outcomes the dodgy sales guys might even be better then some of the old school not for profits.

    Below as a redacted screenshot from my portal. The dwelling value rate is per room SDA payment on a 3 bedroom house on the Sunshine Coast. That enrolled value is what the NDIS pays per resident. Plus we must charge 25% of the Pension and 100% of Rent assistance. So gross rent of over $139k for the place with 3. We tell our investors to be happy with 2 people which is over $93k.

    Yet people are trying to sell house and land packages for this at $550k. They just don't work.
    Should be paying
    $500-600k to build a 3 bed house
    $700-$900k for a duplex
    $2m for a 4 2 bed unit complex

    And the returns are still awesome, but a real. You get them. Cheap ones you don't.

    In a perfect world we wouldn't even be involved in design. People would come to us with completed properties that work and we would be the provider. BUT most stuff we saw was rubbish that doesn't work. Still is. We don't sell packages, prefer that people come to us with a block of land and use one of our designs, introduce to a builder that we work with and pay us a fee to do the design, make sure it's right and all done. Can have people find land for people. One of our guys does put some packages together but that's off his own bat to help people who don't want to look. Not our focus.

    Downsides
    1. Delays in everything.
    It used to take 5 months to enrol a dwelling. We are down to days to 2 months. Then it can take several months to go through the process to get paid. Normally get back paid. This is valued like commercial property and should be thought of like it. It might take 6 months after completion until people get paid, sometimes more. It might be vacant initially for 3 months, sometimes more. Often we have people move in on day 1. BUT there are masses of moving parts with the bureaucracy, not just participants approvals for their SDA, but approvals for their care budgets, enrolments of dwellings. After it's enrolled you still have to get an NDIA planner to load quote requests in a portal, accept the quote and do a service booking so we can invoice. That can take days or it can take months. You can have Public Trustee and Office of Public Guardian staff who don't know about SDA, then refuse to sign SDA agreements. Then we have to write to senior staff and get it done.

    2. No Involvement
    You can't know the name of your tenants, you can't have input into repairs. You can't visit the property. It's a hands off. (this is a bonus for some)

    3. You can't stop it being an SDA
    We have to either own the property or have a lease on title. It's a long term thing. You can sell it but you can't decide to turn it to normal (unless there are 6 months vacancy)

    Upside
    1. Rental Return
    You are being paid not to care about most of above

    2. Capital Gain on Development
    Our houses get valued at over $1m but cost several hundred less than that. Our small unit blocks get valued at $1-$2m more than development cost. They are being sold for more than double (eg total development cost $2.5m selling at $4.7m

    3. Set and forget
    Once you get through the first period and the money starts flowing, you shouldn't even have to think about the investment.

    But if your design doesn't work then the property is almost worthless and you get no tenants. If you don't have the right provider ongoing then you will have vacancy issues, less so in the earlier years.



    sc portal example.png
     
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  11. Harris

    Harris Well-Known Member

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    I wanted to jump in and post my thoughts lot earlier but waited until I had all the info and I am glad I did! I met Darryl and his team at NDISP 4/5 odd weeks ago. I then met another 3 SDA providers in Brisbane and one in Syd.

    I then met a number of SIL providers, NGOs involved in this space, disability co-ordinators (all from Melbourne) and a law firm that has been advising State gov and City of Brisbane and other councils re a long term policy on SDA.

    I am in midst of multiple developments in Melb and have half a dozen other blocks and Darryl and his team assessed all of them and provided feedback on each one without wanting to 'sign' me up or put a deposit. That was all prior to I flying to Bris to meet his team.

    In-brief, there are products which headline at being quite 'cheap' and I then invested quite a bit of time going down that rabbit hole and found out the reasons they were 'cheap'. I had looked at NDISP fees, timelines and build cost and believed those to be 'quite on the expensive side'. I relayed that feedback to his team.

    I then analysed all of the 'cheaper' options and decided not to pursue with any of them - Poor designs, short tenancies, poor processes, significant timelines around build vs commitment timeline at start, no references to previous investors who have invested with them and I could speak to, pressure to 'sign on' and pay deposit and revolving door with the staff - always a big warning sign.

    Once the process, costs, longevity of tenants and long term proposition was worked-out, I reached the conclusion that NDISP/RPI has the best product and the best value proposition. It might not be too suave/ marketing heavy but they were the best of everyone I met by a country mile. So much so, that after meeting them for half a day and exchanging dozens of emails and even after telling them "thanks but no thanks", I would still pick them over everyone else and likely to (if Darryl isn't too peeved about my email).

    It did take some time for me to collate all the info, analyse everything and reach that conclusion but I can say that based on truckloads of my own research (both supply & demand sides) that Darryl and his entity are the best choice for SDA!
     
    Last edited: 24th Mar, 2021
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  12. RPI

    RPI SDA Provider, Town Planner, Former Property Lawyer

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    Hi Harris

    Thanks for the detailed post.

    You are a nice guy, we like working with nice people. Glad you didn't go the cheap and nasty route.
     
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  13. Purple Patch

    Purple Patch Well-Known Member

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    Hey Harris,
    Are you looking at doing something in Frankston? I am assuming you still have property down that way. I would be interested in you thoughts of the potential SDA / SIL market for Frankston.
    Cheers
    PP
     
  14. Harris

    Harris Well-Known Member

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    Yes- that's the plan. I will be starting with Brisbane hopefully through NDISP and in the meantime looking at adding some into my frank developments. Frank is a great market for SDA but there has been quite a bit of activity from various providers there. Ideally I will be adding 1-2 units for SDA for each 10 TH/ apartment build there.
     
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