Looking for a property investment that could make you feel as good as the returns it promises?
As one of Australia’s leading advocates for investment in National Disability Insurance Scheme (NDIS) housing, SMSF Loan Experts founder Yannick Ieko claims it’s the perfect proposition.
On the surface, too, it offers definite benefits: higher than average market rents with yields of up to 18 per cent; returns guaranteed by government; long tenancies; and limited availability.
Then there’s that something extra that’s priceless – knowing you’re providing a quality, specially-designed home to make life for someone with a disability so much more comfortable.
“I would like to think that people might be driven by the ethical nature of the investment, but I think it’s more to do with the net yield that can’t be touched by most investment assets,” says Mr Ieko.
“There are double-digit growth returns too, and with the federal government involved, it’s a pretty safe investment.”
“So, feeling good will normally be more of a by-product of the investment, knowing you’re building accommodation for a person with a disability, and usually a younger person who might otherwise have to live in a hospital or an old folks’ home, which isn’t suitable at all.”
Tenants pay a percentage of their disability pension in rent, which the NDIS tops up to a higher-than-average market rent.
Supported independent living accommodation is in short supply in Australia, so there are always going to be tenants eager to take on leases, and most will stay for as long as you’d like.
Usually, when owners of this type of housing want to cash in their stake, they’ll sell to another investor. It’s also perfectly possible to convert it to sell it as a regular residence by taking out some of the living aids.
“There’s a lot of upside there, but I’d say you need to do your research and due diligence to make sure the area where the property is being built will have a pool of suitable tenants,” says Hovig Evanian of SmartMoney Wealth Management.
“In the right area, it can definitely make sense when you’re looking for cash flow.”
Potential investors should still apply the same fundamentals as they would to any other property purchase, recommends Andrew Zbik of CreationWealth.
“You need to make sure it’s in a location that makes sense, near public transport and near amenity. You have to remember: schemes can change, and you want to be able to sell if you need to cash out.”
One hurdle to investors is the low number of lenders willing to provide finance for NDIS properties and, when they do, they’ll offer only 80 per cent.
Marion Mays, the founder of the Thalia Stanley Group, says that banks may put a lower value on the homes, too, as there are unlikely to be comparable ones in the same area.
“But they can be a great investment if you can afford the initial capital outlay,” she said.
“And particularly if you have a strong social conscience.”