NDIS/SDA Properties - Too good to be true?

Do the "care providers " take up the head lease or just act as a manager ?

 

Hi Cliff,

I work for a financial advisory you are correct, Maroochydore is the sunshine coast.

Google NDIS also and you will find a calculator that will give you these figures direct from the NDIS website. I havent made them up. Happy to send you one in an email if you cant find it.

However, until I see these figures rolling into my clients bank account, I cannot and wont be 100% confident. Hence asking for anyone with completed stock. If it works, it looks like a very good investment, if it doesnt, its a costly exercise. The more information I have, the better informed my clients will be. We will not offer it as an option to every client as it may not fit budget wise.

The property partner I work with has 25 in construction and has 1 that I know of that has 4 participants ready to move in. I am not sure if you believe I am fishing for work or what the issue is, but I like most people am just seeking knowledge or clarification of things I already know. With any new investment there is an unknown, and areas will impact the vacancies, so I am interested to find out.

Full disclosure on my part, the house that has full interest is in Maryborough. Check it out if you want a tip, quite a sad situation there with inadequate housing. The last stats indicated that we only have 99 of these homes in queensland, and 90 of them are apartments, I want to get behind it because as mentioned in my other post, if it works, everyone wins.

(Also, give me a follow on LinkedIn.......)

 

This is what Im being told by providers as well... I'm actually being told that unless you do a 1 bedder, high physical is not that sought after as most of the tenants in need of this type of accommodation prefer to live alone/with a carer only... if you are doing 3 or 4 bedders the advice I have received over and again is to use "improved lives" or "fully accessible". as it will minimise the fit out extras and still provide accommodation NDIS providers want, and also provide investors with pretty tidy returns. Nowhere near the returns on offer for High Physical, but superior to vanilla dwellings . Also got to be realistic about huge val shortfalls with robust and high physical builds... as someone mentioned above you may need 250-300K extra to cater for those issues. Yes the returns are amazing if you can get one done and tenanted...and I mean AMAAAAYYYYYZING, but the entry price to that particular game is steep and not everyone can find a lazy 250-300K extra. Only those with deep pockets and institutionals can really play there ... and then there's the question of an exit strategy-resale.... when you build a super specialist security and fit it out that way, not only is it expensive to get in but it is also going to be very hard to sell. You may have to remove some of the fit out to get a sale....again, the cash flow should more than cover that - just putting it out there

 

We are looking into the suitability of NDIS with our Dual occ. product. We can do an "improved lives " or "fully accessible" house and the 1 bed granny flat can act as OOA. (Overnight onsight accommodation) without real;ly adding muchn to the build cost , and your question is something we have asked some of the providers this past week or so.... waiting on some answers. Difficult finding anyone with a strong understanding of the NDIS ins and outs ...but give me some time and I'll be all over it

 

@euro73 - both your last 2 posts are pretty spot on there with your assessment of things from my understanding.

@Beano - The care providers are called service providers and they enter into a lease with the owner of the property and they then enter into separate individual leases with each tenant who resides in 'your' property.

The service providers need to be certified and registered with the NDIA

The incentive appears to be a win win for all involved so far. We have several in the construction stage and one in the very final stages of construction where tenants have been found. A good service provider (which we have) will start the ball rolling on sourcing suitable tenants very early in the piece which gives several months for everybody to carry out their due diligence and make sure everybody is happy. Given that the process has really only been introduced in QLD since early 2019 - things are pretty much on track. Its still a very new concept to individual investors, finance institutions etc in SE QLD. Many are still doing their research.

In fact the main problem currently is that the NDIS offices are dragging the chain in processing eligible NDIS recipients, but thats probably a given for gov't agencies.

Exit strategies and resale options haven't occurred yet given the infancy of the incentive.

Personally I think many of the house fit outs (SILs, FAs etc) would make great alternative 'aged care' living options if one wanted to exit the NDIS arrangement.

 

What is the build cost per m2?

 

With the NDIS program, as an investor, do I just pay for the build cost and hand it over to an SDA provider to lease it out? Or there are more paper work and physical work that needs to be done?

Or is it similar to NRAS where the government approved property manager will looking after everything for me?

 

Are you selling these to investors or are you involved in the development of the assets? Keen to learn more.

 

Do the service provider and/or the tenants put some equity in the property ?
So say we look at a $600k property would the above two put in $400k?
$200k each the provider gets a business . The tenant gets a home (Similar to retirement/rest homes where the tenant is happy out in $400k for a retirement unit)
It's a very limited specialised property and I would not want to be left holding a property with limited market.
The developer will make his profit but the landlord could be stuck with a "white elephant".

 

@Beano, I cannot imagine being left with a white elephant property. There are thousands of people across Australia who would love to get into specially built properties to meet their individual needs and so far (in Qld, at least) hardly anyone has ever bothered to meet this need. As noted, the cost to provide the specs required by people who have various disabilities is outrageous. There is no such thing as an "investor" who would built a home to the necessary specs, then rent it out privately to a person whose only income is $400 a week pension.

Not everyone who has a disability requires the maximum specs either. My son, for example, requires a place where he can chill out away from noise and smells and other people with their crying kids and their cats coming over the fence.

 

Hence the question
How much is the cost to build ?
If you are paying 10% to build you need to charge at least 10% more.
Specialist buildings and fitout I like to recover over the lease term.

 

Hi RPI, I would like to speak to you about this. I'm a UK investor who has spent some time researching this product. I have googled you but I've been unable to find you. I'm new to this forum and I wonder if you could reach out to me so that I can discuss this with you.

 

Hi Geoff

We are running in QLD, NSW, VIC & WA and are moving into other states as well. Thanks for suggestion

 

Building is much more expensive than a usual property. eg on a 3 bedroom plus carers house there are 39 man days for electrical, air con, solar and automation. $110-$120k alone.

Our Brisbane 4 x 2 bed units are being valued at 8% cap rates and regionals at 9-10.5

 

That's not correct. You can have 5. But I wouldn't do over 3 unless there was an exceptional provider in place.

 

4 beds are very old school and likely to be phased out.

3 bed plus carer max.

Best for vacancy is 2 bed unit or villa with one person in.

Lots of work needed on tenant mix and matching in share houses. Above 3 residents am not a fan of at all.

 

Correct. or Equivalent thereof. It's referred to as Reasonable Rent Contribution. And above is the amount currently set.

 

High Physical Support is the most urgent need, as in it is very hard to live in a normal house if you are at High Physical Support. This is why our focus is there, as well as we started this journey working with organisations with quadraplegic clients.

Our 4 x 2 unit complexes are getting good vals. Cannon Hill $4.35m for example. High Physical houses are being valued as residential and come in between$0 (as in we won't touch them) to contract price or anywhere in between. Mostly 15-20% under.

Half right on the high phys not wanting to share - that is one group. If you broke your neck now and didn't damage your brain would you want to share with other people?

But there are also high physical people who need to share or want to share for social interaction. We have plenty of places with people like that also. Eg individuals with Cerebal Palsy etc who are in their 20's and very social, even if their speech is limited. Their familes want them to live with similar aged people 1, or 2 others. We have 2 and 3 bed houses setup for that. You are looking at round $500k for a house build like that. They are 4 bed 4 bathroom with extensive amounts of technology in them, solar and battery systems, doors, blinds that open with voice, phone, tablet RFID. 39 man days of labour just on electrical, solar, air con and tech.