The Australian Government’s NDIS (National Disability Insurance Scheme) has created a demand for high-quality Specialist Disability Accommodation (SDA). While the specialist nature of the housing can require a higher entry cost, the return is significantly higher than traditional residential housing, and the SDA property is backed by the National Disability Insurance Agency (NDIA).
Want to learn a little more about SDA Property? Read our introduction here.
Financing property that is purchased or built for used as SDA (Specialist Disability Accommodation) as part of the Federal Government’s ongoing commitment to housing those with disabilities, certainly isn’t without its challenges.
This FAQ introduces and answers the primary finance challenge.
An SDA property isn’t a standard property. The property is built or modified to exact standards with modifications required for those that may occupy the premises, and these additions are made on teh basis of the category of occupant that will occupy the home: ‘Improved Liveability’, ‘Fully Accessible’, or ‘High Physical Support’. Modifications to the property might include wider stairs and hallways, wider doorways, lower bench-tops and kitchen fittings, rails in bathrooms, automation, bedroom ceiling rigs, exterior ramps, and so on.
Depending on whether the property requires on-site care there may also be a requirement to build On-Site Accommodation (OOA) for support workers. In addition, there’s requirements for each bedroom that may require a ‘Private Area’ and/or kitchenette facilities. The list goes on.
As you may be able to tell, the fixtures, alterations, and additions, all add up very quickly. While the exterior of the property is largely indistinguishable from any other property the interior is significantly modified. However, when most banks value the property they value the property as per their standard guidelines, which is usually predicated on valuations from other similar property in the area. Despite the increased funds that went into property modification or build it’s valued as if it were a standard residential home, thus reducing the LVR (or Loan to Value Ratio).
NDIS Specialist Lenders = Commercial Valuations and Rental Income
Using a specialist NDIS funder, the valuation would typically be confirmed as the actual land and build costs. We recommend those investing in SDA properties plan on an LVR of 80-90%, meaning that cash funds or equity be available for use with other investments. Note – NDIS/SDA-friendly banks need a good credit history.
Construction Loan
NDIS can be purchased completed, but most often, as they are in high demand, are purchased via Construction loan.
SMSF can buy or build NDIS Investment properties – contact for more information
The returns from SDA property generally ranges anywhere from 8% to 18%, depending upon the category build, location, and size. The high returns – backed by Government-funded tenants – are what make the SDA property investment an attractive investment option.
FINANCING NDIS
There are 2 options for financing your NDIS investment property:-
- 80-90% needing full financial information and servicing of the new loan – advantage is full NDIS commercial valuation and full use of NDIS rent and rebates to show servicing.
- 80% lending based on NDIS rental alone – so “stand alone”. This is commercial finance and so the borrower is via a corporate trustee – setup by an accountant.
We have dozens of products available from our vast array of banks on our panel that may be suited to your specific circumstances.
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