The National Disability Insurance Scheme (NDIS) offers a booming and potentially lucrative 'set and forget' opportunity for the right investor according to KR Peters Director Peter Nicolls.
"We are getting a lot of enquiries from people looking for land that is suitable to develop into a property for clients of the NDIS," said Mr Nicolls.
"The government wants three and four bedroom homes in which NDIS clients can live with one extra bedroom room for a carer to stay overnight."
Mr Nicolls described the rental return on NDIS properties as "exceptional".
"For the right properties the NDIS is paying investors approx. $150,000 per year for a four bedroom house and $100,000 per year for a three bedroom house," he explained.
" The rent return, after all expenses have been factored in, is between 10 & 15 per cent, compared to 2.5 per cent in the normal residential market.
"That is exceptional."
Mr Nicolls tempered his comment about the outstanding rental returns with a caution that it can cost $100,000 to $150,000 more to build a home to NDIS standards.
"When an investor looking at this option organises finance he or she needs can be geared up to 90 per cent. However, the investor needs to make sure they use a lender that can accept commercial valuations. Otherwise, the investor could be restricted to as low as 60 per cent," he explained.
Mr Nicolls said outer growth suburbs like Officer, Pakenham, Clyde and Berwick were ideal for NDIS housing as land was more readily available in greenfield estates. It is much harder to find available land in the inner and middle suburbs.
"An NDIS property offers an alternative investment that does provide a very good return once you wrap your head around what it's all about and find suitable land in the right location."
Ross Laurenson, National Distribution Manager at Tradies Finance, is an expert in the area of NDIS Finance and property development.
He echoed Mr Nicoll's sentiment that an NDIS property can be a potentially lucrative "set and forget" investment.
However, he has simple advice for potential investors.
"There are ways investors can go about this - the easy smart way or the complicated way. The complicated way is to think you can do everything yourself and make a lot of money.
"The smart and easy way is to a find property which has already been sanctioned by the NDIS. If the NDIS is happy with the land, happy with the fall etc, and they have approved a development to go on the land, they will issue what's called a Comfort Letter.
"If you haven't got a Comfort Letter you're taking a risk whether the NDIS will eventually approve the development and make the decision to sanction it. But the NDIS is another government body and they all move at a snail's pace."
After finding land through KR Peters, Mr Laurenson advised engaging a builder that was approved by the NDIS and consulting an NDIS finance expert in the area, such as Tradies Finance.
He said working with experts with NDIS experience will speed up the regulatory and building process and get homes built faster for people living with a disability.
"The safest, simplest way as an investor is to approach Peter and his team at KR Peters who have access to property that has already been sanctioned and approved then the build can commence within weeks of settlement."
Mr Laurenson said the NDIS wanted homes completed as soon as possible to meet the ever growing demand from Specialist Disability Accommodation (SDA) providers.
Ideally land should be close to shopping, transport and medical services, all the things property investors should be looking at for any appealing rental.
He confirmed that the rental returns on NDIS properties was "ballistic".
"A four bed, four-bathroom house in Officer for 3 participants and one carer, which costs $1 million to build, would bring in up to $165,000 a year in rent. That's a 16.5 per cent rental return.
"It is an ethical investment but one that is handsomely rewarded. In this day and age getting a cash positive investment is unheard of. All the talk is about negative gearing as a strategy. This is positive gearing."
He said investors had to factor in a slightly higher interest rate because "not many lenders are doing this" as well as the normal costs of holding a property such as council rates, water, landlord insurance and property tax.
The SDA will manage the property for roughly a 10 - 12 per cent fee. I say roughly, because each SDA has its own pricing model and you will get the opportunity to negotiate with and engage the SDA you feel most comfortable with.
Mr Laurenson said the SDA providers offered landlords 20 year leases with annual CPI increases.
He said with Australia's population projected to grow, so would demand for NDIS accommodation.
He advised an NDIS property wasn't suited to a first time investor, but rather for "someone who has done it before and understands the figures".
"There are a lot of moving parts to this scenario, but KR Peters can put a whole program together for interested investors."
To discuss more about the opportunities offered by investment in NDIS housing, contact the KR Peters team at Officer on 5943 1111 or Wantirna South 9800 0000.