If you’ve read enough about Specialist Disability Accommodation (SDA) investment to be considering an NDIS property investment loan, then chances are you’re already aware of the undeniable benefits of investing in such a benevolent opportunity. However, you’re likely also aware that the homes are more complex than standard homes, and therefore you’re potentially wondering what the additional complexity of lending for SDA homes are.
At NDIS Loan Experts, we are experts in the NDIS investment property process, so keep reading as we bring to light some of the challenges that we will happily support you through, to make your National Disability Insurance Scheme (NDIS) property investments dream a reality.
Do Australian banks finance SDA projects?
Australian banks have demonstrated that they are on board with the growing number of investors looking to make a difference within the community. Given that the SDA funding for accessible and affordable housing for people living with disability was an Australian government initiative, Australian banks have demonstrated leniency and now offer:
Home Loans for NDIS participants
Bank LVR: 60-80%
Shared Equity LVR: 100%
NDIS Investment loan
LVR: 60-70% depending on risk and valuation method of NDIS investment properties.
Shared Equity Loans for NDIS participants and family
LVR between 60-70%
Commercial Loans for community housing providers and other SDA providers
LVR between 60-70% depending on risk and valuation method.
However, there is also the opportunity for investors that hold a self-managed super fund to look at a Limited Recourse Borrowing arrangement to buy an SDA dwelling within their SMSF.
What do I need to be approved for an SDA property loan?
Due to the government offering a 20-year SDA payment guaranteed to NDIS investment homes, the banks look at this favourably and therefore consider lending to investors with a 20% deposit and who have found an SDA compliant builder.
The other criteria that lenders look for are similar to regular property mortgages:
- A reputable credit history
- Impressive credit score
- Stable employment with strong income
What are the challenges with SDA investment lending?
The challenges that come with investing in SDA housing really do stem from the added complexity in NDIS loans and the SDA requirements. Some of these challenges might include:
- Finding a buyer should you wish to sell (as the property is so unique and the valuation may not be representative of its niche place in the market. Because SDA properties are so new, there is currently no valuation benchmark, and therefore the property may be valued as a standard residential property).
- SDA properties are only able to be built by an SDA approved, compliant builder.
- There are concentration limits on land, and there are restrictions on how many dwellings are allowed in a particular area.
- If the tenant moves out, you’ll need to source another NDIS participant to fit the design category who is searching for accommodation in that specific area.
- Your borrowing power can be impacted by the difference in market rental income and the actual income you’ll receive. Lender’s do not take into account the SDA payments, reasonable rent contribution and higher expected rental income.
- Some lenders may not accept the property as security due to it being extremely specialised.
- The cost of construction may exceed the final value and thus become overcapitalised. This is driven by the stringent and very specific design standards for SDA properties.
To learn more about how to overcome any potential challenges with your NDIS investment property loan, contact our team today.