NDIS/SDA Properties - Too good to be true?

Has anyone done any thorough DD on these?
A QLD based friend was telling me a little about them on the weekend, they are in the process of building one in middle ring Brissy.
All comments welcome.
Thank you

 

NDIS housing as a promising investment

 

Hi Yes its true, its part of a 700million government initiative to stimulate private investment.

The government is paying over market rents to establish more housing for this carer group, the properties have to be done to specific requirements but generally they look exactly like other rental houses.

let me know if you want more info on it

cheers

 

Hi.

They are excellent returns but it is not straight forward, you can't simply rent to an NDIS participant. You must go through a registered Specialist Disability Accommodation (SDA) Provider. There is a large underlying demand but it is not well know in QLD.

My partner and I have spent significant amounts of funds and time becoming an SDA provider. Early on there was significant legal work undertaken to secure a model that would allow individual investors to own NDIS properties without having to deal with the compliance nightmare that is SDA under the NDIS. We have spent the best part of a year working with care providers and NFP's to design quality accommodation that suits the participants and develop a model that works for all parties. Have previously worked on providing disabled accommodation pre- NDIS and working out that there was no way that our philanthropic work could raise enough funds to provide enough quality housing for disable people, we were keen to develop a market model under the NDIS that would really allow the maximum number of people to be assisted.

Happy to answer questions, but hopefully details below go a long way.

You can see the rough payment rates here

SDA Pricing and Payments | NDIS

Yes you can get 10 years of rent, with 60 or 90 day vacancies covered and as an example of the TOP return available

Net of our property management fees, SDA compliance fees and care contributions

2 bed apartment with 1 participant (typically size of 3 bed so 100ms plus) - $94k per year - $700-$800k
4 bed house with 1 participant on small lot in new estate $110k per year - $500k total cost land and build
6 bed, 6 bath, 2 kitchen, living, laundry house with 4 participants (split up into 2 separate areas so 2 participants per side) - $131k per year - $750k-$1.5m total cost land and build
Innovative Design with 4 participants - $376k per year - $1.9m total cost land and build

But it is not something you can simply head off and do yourself. I wouldn't touch it with a barge pole unless you can get north of 150 properties under management. Even with our volume it is no walk in the park.

There are some dodgy products out there and I simply wouldn't touch a large number of designs that are under construction, it looks like there has been no consultation with the end user or the care providers and they have been built spec, often cheaply and poorly located.

The rental returns can be great, but the build costs are high and should budget so that valuation is to come in at least 15% under contract price. Also, unless there is a relationship with a care provider and the accommodation has been designed to suit the particular participants or their care provider then it may be an expensive exercise for no benefit.

To give you an idea of extra costs, all of ours have at minimum
- full PWD bathroom to each bedroom with reinforced walls for rails
- every bedroom has to be large enough to accommodate large chairs (1 and 1.5m turning circles around the beds)
- ceilings reinforced to fit, or in some instances already fitted ceiling rails for transferring participants from chairs to beds to shower beds
- a separate office, bedroom and ensuite for carers
- a $22k solar and battery system for critical power to each dwelling
- automated doors, windows, blinds, lights, air-conditioning
- security, emergency response and monitoring systems
-1200 wide doorways, hallways and paths
-straight stairs in double storey
- lift to double storey houses
- accessible kitchens
- large laundries

At present we currently have ready to go

- 60 plus units with DA approval across Brisbane, Moreton Bay, Gold Coast and Redcliffe
- A dozen house and land packages across Brisbane and Logan

We also have underway
- 15 blocks of land secured with houses in design stage
- 50 plus blocks of land in negotiation stage in new estates
- 50 plus units in negotiation stage
- staff/contractors looking for nearly 100 knock down sites in the Brisbane City Council area

Note that these are spread, you are not looking at facilities or institutions for disabled people, they are a 10 units in a 40 unit block etc, or 20% of a land subdivision maximum.

We also have some developers (large and small) engaging us at the design and find stage and then entering into agreements for us to be the provider for their properties and also have some other SDA providers who are having us manage (also a real estate agency) their existing or new properties but retaining the compliance themselves.

Currently have some significant dollars from AFSL and private closely held funds purchasing above properties to hold in their portfolio. We need to supply more than 140 dwellings to those funds we have engaged with thus far. The demand is significant, we are so far providing just a small amount. We want to provide as many as possible during the roll out so that as many disabled young people as possible get out of nursing homes and other disabled people get out poor unsuitable accommodation.

 

Hi RPI, I'd like to chat to you about this. I have a property fund that is moving towards ethical investment and I'd really like to know if there is someway we can support your endeavours and give our investors more than just a good economical return (but also an 'emotional' return). I'm new to this forum so not sure how to make contact without publishing personal details etc. Hope to hear from you soon.

 

For investors is this predominantly about the high yields? What about capital growth?

 

Do you have more info in relation to your services as a SDA provider and potentially building properties to be handed over to be used as SDA housing?

 

Your SDA pricing link no longer works, is there an updated one?

 

google sda pricing. The NDIS changes links all the time
the current sda calculator is attached as is the price guide.

 

I'm looking into building NDIS accommodation on a 1600m2 site in metro SA. There is a lot of information available on various websites, but would appreciate some advice if anyone could tell me in a nutshell; is it better to build and sell, retain and lease to an SDA, how much does the build cost increase to meet design requirements, and any other basic info that's worth considering in the early stages.

 

Thanks that's great

 

Hi Sasha,
Leasing would be the way to go. Build cost would depend on which on the category you will spec it for. We have done High phsyical support homes with assistive technology and they are coming in close to 500k to build. I am sure you can go for cheaper options and categories but that what we have focused on. Returns for a 4 bed high physical support home with OOA is $167k per annum. You would need around 250/300k in equity or cash to cover the short fall in one these though.

 

How do you get a return of 167k? As per the NDIS pricing group homes are limited to 3 participants?

 

Group Home 4 residents pays $36,207 with OOA. Allowing 1.07 for location multiple and 1.9% for Sprinkler Allowance, that provides for a maximum of

$36,207 X 1.07 = $38,741.49 + 1.9% = $736.09 = $39,477.58 x 4 = $157,910.31..... is that about right ? is there also a break out room?

 

You also have CRA and 25% DSP I believe.

 

High physical support - Based in Moreton Bay and 4 tenants with Carer on site accomendation.
NDIS Payment $32,585 per tenant = $130,340
Rent contribution $9,412 per tenant = $37,648

Different areas will differ slightly and a few different combinations but they all make you a very good return.

 

Having been selling these properties / House and Land pkgs for the last 12 months its probably more realistic to base your returns on 3 or 4 tenants in the Fully Accessible category. The likelihood of 4 High Physical Support tenants all tenanting the 1 house is highly unlikely. Its just not practical or at times logistically possible (with only one carer). 3 FA's or 2 FA's & 1 HPS is more realistic. I have never come across a house being tenanted with 4 HPS.

 

Yeah agreed, whenever i actually do a costing analysis on the property I only factor in two rents. Although I have one Property due for completion with 4 participants registered to live in it, and another 1 on a waiting list. If you can engage the participants from day dot, you can get great results.

 

Hi James

Bit surprised you're quoting returns on investments

When on this thread your asking people's advice on vacancies on the same class of properties

A quick google / Linked-in search shows a James Fontaine working for an advisory company in maroochydore ( you are listed as being Sunshine Coast ) ..

I'm just left a little bit puzzled that you're commenting on returns but aren't sure of vacancies . In this thread you're also commenting on putting people in them , but on the one I'm quoting you're undecided .

Which is it ?

Left a little bit gobsmacked by contradictions from someone who appears to be working in property investing .

I'm happy to be corrected if I'm incorrect in any of my assumptions .

Cliff