If you’re considering investing in NDIS SDA property, it’s essential to be aware of the common and costly mistakes that investors often make. Our article provides practical tips and guidance to help you avoid these common pitfalls when considering an NDIS SDA property investment.
What is Specialist Disability Accommodation (SDA)?
The National Disability Insurance Scheme (NDIS) is a government scheme that supports people with disability and is jointly funded by the Federal and state/territory governments.
Specialist Disability Accommodation (SDA) is a component of the NDIS that provides funding for accommodation solutions to eligible participants with extreme functional impairment or high support needs.
4 Investment Mistakes to Avoid When Building NDIS/SDA Properties
Mistake #1 – Not doing in-depth research
Not doing in-depth research when investing in NDIS property can lead to costly mistakes, such as investing in an area with low demand for SDA properties, resulting in low occupancy rates and reduced profitability.
Key areas for research when investing in NDIS SDA property include:
Location: Researching the location of an NDIS SDA property is essential to ensure that it is easily accessible and has nearby local amenities that are important for the tenant’s needs.
Potential rental yield: Researching potential rental yield and investment performance is crucial to determine the market rates, vacancy rates, and potential for rent increases over time, ensuring the investment is financially sustainable in the long term.
Demand for SDA properties in the area: Researching the demand for SDA properties in the area is vital to ensure that there is a sufficient number of eligible tenants to occupy the property. This includes understanding government policies, population demographics, and competition in the area.
Mistake #2 – Not understanding the regulations that govern SDA properties
Investing in SDA property requires compliance with strict regulations that govern the properties’ design, construction, and management.
Since July 2021, the SDA design standard has been enforced, requiring all specialist disability accommodation properties to be certified against the criteria.
An accredited SDA assessor must issue a certificate of compliance to ensure that each SDA dwelling adequately supports NDIS participants residing within them.
If the design standards aren’t met, it defeats the purpose of providing SDA homes — and the home won’t qualify for government funding.
Read more about the SDA design standards here. ‘
Mistake #3 – Not understanding SDA funding and occupancy
Investors who fail to understand how SDA funding works risk making costly mistakes when investing in SDA housing. SDA funding is based on various factors, including the number of active participants, the building’s location and type, and its design category.
Some investors make the mistake of assuming that they will have 100% occupancy at all times, and that the participant will be approved for the maximum funding allowance.
This isn’t always the case and can lead to unexpected losses if the investor anticipates continuous occupancy. It is crucial for investors to conduct a purpose-built SDA feasibility analysis with realistic assumptions before investing in SDA housing to avoid costly mistakes. Don’t focus only on the promise of high returns without fully comprehending the intricacies of this highly specialised sector.
Mistake #4 – Not having a clear investment strategy
Investing in NDIS SDA property requires a clear investment strategy for several reasons.
Firstly, NDIS SDA properties are a specialised type of investment that requires a thorough understanding of the specific regulations and requirements involved to avoid making poor investment decisions.
Secondly, there is a limited pool of eligible tenants for these properties, so it’s vital to ensure that the property is designed and built to meet the specific needs of NDIS participants to maximise its potential for occupancy.
Finally, investing in NDIS SDA property can be complex. High ongoing costs, such as maintenance and repairs, can be associated with managing the property.
A clear investment strategy can ensure that the investment is financially sustainable in the long term and that the property is managed in compliance with relevant regulations and standards.
Investing in NDIS SDA property can be a lucrative investment opportunity, but it’s crucial to avoid these common and costly mistakes.
Our NDIS Loan Experts team understands the investment process and can help you make informed decisions to avoid common investing mistakes. Reach out to our team today on [email protected].