NDIS/SDA Properties - Too good to be true?

You would have to be very careful to ensure that the granny flat wasn't a different dwelling. The OOA can be adjoining but not additional. Units it has to be a self contained unit.

 

I'm confused by your statement above, maybe wrong language being used?

Specialist Disability Accommodation (SDA) Providers are separate to care providers. Although in some instances they do both it is a massive conflict of interest, shouldn't happen and is likely to be forcefully separated soon.

The SDA provider must own or lease the property. They may then enter into an agreement with a care provider called a Supported Independent Living (SIL) provider who organises the care in the house. However due to choice and control provisions they can be removed at anytime that more than 50% of the residents want them too.

Increasingly we are finding independent support coordinators are being involved rather than a single SIL.

 

It can be hard to work out on a m2 basis on high physical support. The solar and battery and the automation doesn't change much between 2 and 3 bed places.

Our prices are coming in fairly consistent across the country, even though in Cairns we have double storey core filled block units, WA everything is double brick inside and out, and stick frame and lightweight floors in Brisbane.

4 x 2 bed plus carers units come in at $1.3-$1.7m for between 600m2 and 700m2 buildings

3 bed 3 bath plus ensuited OOA at 260-270m2 comes in around the $500k, drops to $450k in some areas.

 

Only an SDA provider can claim an SDA Payment (limited exceptions to this do exist but rare). SDA provider must own or lease the property. Long term control is required to comply with obligations. We are extremely heavily audited, expensive and thorough.

Interestingly, our auditors were saying many of the NRAS boys who pivoted to SDA will fail subsequent audits as they know they bought policies and procedures but have zero intention or capacity to follow them.

Property management doesn't even begin to cover what's involved in these. Looking after each property we have
1. Asset Manager (manages next 3 and is owner's point of contact)
2. Project Manager for Maintenance
3. Accountant
4. Relationship Manager - just makes sure the residents are happy. Visits for incidents and complaints etc.

We also have a full time compliance manager that makes sure all our staff and contractors are compliant.

And services or trades that enter our properties:
1. Must have a blue card,
2. Must have a yellow card,
3. Must have completed the NDIS worker orientation module,
4. Been through an induction program with us;
5. If a contractor we have to have audited their policies and procedures to ensure they are compliant;
6. Must have our App installed to check in and out of property, comply with information on residents etc. Selfie themselves with the app that date stamps and geotags the photo to make sure that it is them and not their apprentice or cousin etc.

 

We get 4-5 genuine tenant leads per day. There was originally 28k in tenants estimated, this has now gone to 60k. The rent is paid for 20 years at the new build rate, after which you get the existing build rate to "encourage" investors to not return the property to the normal pool.

Have a look at the pic. Yes dearer to build but drop the ceiling rail and the grab rails in the bathrooms and you have a luxury property with ensuites to every massive bedroom, solar and battery system and voice/phone/tablet controlled doors lights fans blinds aircon.

 

Our 4 x 2 bedroom units return over $300k a year after management costs. More than recovered.

 

@RPI

How would it be received to have a High Physical support Resident in a Granny flat, with a 3 bed Fully Accessible group home with a shared OOA between both via an Internal door?

It seems to be do able according to the design rules.

 

PS

Lots of posts answering questions but not we don't really sell SDA property. Thought we might have to when we started. Have some examples on our website but we don't unless it helps get more people into decent places.

During the research on this we met hundreds and hundreds of people living in horrible places. It turned from business to being driven to get people out. We are lucky that a large number of investors, REIT, Managed Funds, Investment Arms of NFP's etc have joined us.

We are about to hit the 1,000 properties in our pipeline around the country. Have tenants moving in Victoria, lined up to move in places in WA, QLD and NSW.

Currently spend more time saying no to investors who have built dodgy stuff with other people's designs (passing standards does not mean fit for purpose) or who have $ signs in their eyes and won't reduce their income to give back as we require our owners to do.

I haven't really posted here much on this space, definitely haven't tried to sell stuff. Mostly because I live on planes and need to take a minute when I wake up to remember where in the country I need to be.

I think, although I could be wrong, that there is only one active forum member who is having us be their SDA provider.

So please don't take info as me selling stuff, we come across that so much in the SDA space. Project Marketeers have gone nuts but the changes to the Quality and Safeguards Commission is weeding them out.

Happy to answer questions. Always happy to get more people out of horrible places by helping someone with information to get into SDA. But have never done a sales presentation on this stuff yet. We run info sessions for NDIS particpants every week around the country and it is lovely that we get to do so.

 

Hi Archaon

3 bed is a house, group home is 4 or 5 (sorry for being pedantic) But sounds like it would meet regs.

The OOA could be part of the house and be shared, you couldn't claim it across both though (only units where you can claim up to 10). It just can't be it's own dwelling. So attached to GF fine, attached to house fine, as stand alone GF - nope.

But just cause it meets regs doesn't mean it's fit for purpose.

eg

If it is a 1 bed granny flat, never met anyone who wants 1 bed. 2 Bed would be different lots of people who live alone want 2. HPS has lots of gear. Also someone who is a member of a couple can't claim an SDA payment for a 1 bedroom (not live with, but merely member of a couple).

As long as this wasn't the "disabled" house in the street. block big enough, indistinguishable from the houses for the able bodied etc then it I don't see why it couldn't work.

Vacancy is a non issue now, but the BIG difference with SDA compared to anything else I know of

NO PRICE VARIABLES

It costs the same for a tenant to live in your place as it does in a waterfront place. You can't discount price a busy road, or distance from amenities etc.

ALSO
cost for fully accessible and high physical support is not massive. You still want 1200 doors and 1500 hallways. Want automated doors. But no solar battery and less automation. Best to build to HPS but accept FA and HPS if you can get funds to do so.

 

Say we have
Land $500k @ $25k 5% return
Building $1.7 @$275k 16% return
Lease $300k
If I supply the land @5% would you build and lease for a 16% return ?
The rental for the land is fixed for say 12yrs reviews at 5% of land value.
You build , maintain , pay all outgoings have a lease for perpetualty.
Simple lessors ~lessee interest.

 

Thanks for the detailed reply, alot of useful info!

Could you please clarify this further, if a HPS was in a relationship, they would need a 2bdrm to claim the NDIS payment?

Is this so there is a room their partner/child(ren) to stay?

The issue with trying to build 2bdrm is lack of living/dining space.

 

Not sure why we wouldn't just buy the land. But Interesting model.

 

It's just one of the many rules. Any SDA provider cannot claim a payment for any one who is a member of couple in a one bedroom unless there is la similiar sized private room, regardless of what level they are at, eg IL, FA HPS.

Just like a parent can't live in the same dwelling. Doesn't mean they can't live in a non SDA dwelling on the same block.

 

15-20% under requires the investor to take a Huuuuuuuuge leap of faith. They are punting on the fact that if they pour in the deposit + stamps + the 15-20% shortfall, they will get it back through yield... which requires occupancy demand is high...which is a crapshoot. You almost need to build to order.... there's no point building a Rolls Royce if the end user isnt ( tenant) there, and actually prefers a Toyota.... and what if they decide to move? Replacing the tenant isnt a vanilla proposition. All the things investors need to balance, I guess....

 

You are spot on.

Same as my team constantly have a discussion with individual buyer's lawyers (never the institutional ones) about how it should be the landlord's decision to repair things etc at their expense and it's not the "usual" way or it should be a landlord's commercial decision. Their response is that commercial rent on a 4 bed house (3 plus OOA in our case) is what % and your client has the chance at multiples of that.

Build a high physical 3 bed house in an area with location factor of 1 and

1 bedroom occupied for 12 months is $40,577 (plus but ignore for simplicity) or 780 a week. In most non-Sydney areas that far exceeds the market rent for the area. So in most areas you need 1/3 occupancy to beat market.

Small unit complexes have much better returns. A 2 bed unit with a person eligible for 1 unit is $88,965 a year.

We have full time relationship managers that only look after tenants, help them do what needs to be done to move in (or out -its user choice after all). At the moment supply of tenants is zero issue, you can build crap and still get them. That will change once there is decent supply in an area though.

It's all about vacancy in these places, not just now but over a decade. After a decade run an excavator through the place. Still have 10 years left at same rent but as long as vacancy has been dealt with then all good.

As always it's risk and reward but with this stuff you don't need 100% occupancy to work.

3 bed house with 2 residents all year in .91 location factor (Sunshine Coast)
Improved livability - $43,991
Fully Accessible - $50,745
High Physical - $73,850

If you built to HPS in quality and did a $500k house on a $300k block of land

that gets you
IL 5.5%
FA 6.3%
HPS 9.2%

Not stellar returns but that's with 66% occupancy rate to get above market returns. And that is without accounting for reasonable rent contributions.

And get tenants and there are no arrears. Claimed by SDA provider from government for the payment plus redirect centrelink for reasonable rent contribution.

If you do 4 x 2 bed units it gets better
I'll use a real example . Cannon Hillin Brisbane 0.95 location factor for units

1 resident in each unit, but allow for 25% vacancy (we could fill it 3 x over with current waiting list of HPS we have for it)
IL $118,391
FA $191,155
HPS $253,550

on a $2m total cost ($4.35m val though)

IL 5.9%
FA 9.5%
HPS 12.6%

so 25 % vacancy at middle rate and you are double returns.

Cannon Hill will have leases signed with tenants by time slab is done. Tenants want to now, we just want do it until construction starts.

As with everything there is risk, but the downsides on this are pretty low UNLESS
1. design is wrong. Then you are going to struggle in the long term;
2. non compliant operator - no more funding/pay back etc (and it costs $20-$50k a dwelling to bring our automation system in post build - we can't manage the property and be compliant with out using our system - we'd have to charge way more in fees and change our system so we just don't do it)
3. location is wrong.

There is massive demand so it's not going to go away in 6 or 12 months (some locations might hit supply - unlikely in that time), so if want to balance risk then I'd just sit on the sidelines and wait. Arena REIT are buying at 6% cap rates after 12 months of figures. Plenty of our guys will sell at 8 or just below after 12 months.

 

I was told by a agent that the business makes a lot more money investing in the business than the land.
I have looked at 12 hotel businesses (100% of all the ones sold over the last 3 yrs) QT , Hilton and Accor . All were leasehold or just had the business.
I believe the Hilton big success was NOT owning the brick and mortar just the business.
I would say you are very clever in business and have come up with a great concept.
If you free up some funds by not owning the land you will probably make a lot more.
In 50 years your business may be as well known as Accor , Hilton or QT!

 

Thanks Bean. now get it.

 

Up to number 25 Lessors interest now

 

Are you able to advise who your service provider is? Do you get more income if the property is in a better area closer to the city ? If not I’m guessing it’s more feasible to build further out ? Has to be a brand new build not Reno? Will the service provider help engage a builder who knows what is required ?