NDIS Investing: is there anything safer than having the federal government paying your rent?

10% to 14% Returns from This Government Funded Investment Program. Income Producing Investment With $487/wk positive Cash Flow on Residential Property

IMPORTANT: You need a big deposit for an NDIS property. Use the button below to see another option whwre you can et started with as little as $85,000.

10% to 14% returns are clearly exceptional for residential property, why are they so high?

The government is deliberately paying high rents to stimulate investors into building $5 billion worth of residential property.

$25,410 a year in positive cash flow.

That’s $2,117 a month or $487 a week.
This money is paid monthly directly into your account. You get this money today, not at some unknown time in the future.
I understand that I am setting an appointment to discuss an investment into an NDIS property. I understand and accept the fees and charges as detailed in the video if I choose to move ahead.

Take Home $25,410 a Year

Thanks to these government backed rents, after paying all the interest and management costs involved, $25,410 is the lowest amount you are looking at taking home.

At the higher end you’re  potentially clearing $64,241 a year.

But I want to make this clear, we will never build an expectation around this top end figure

Highly Affordable Homes

We have put together NDIS homes for as little as $495,000. These are not over engineered homes that can’t meet bank valuations. 

To the untrained eye they will look like a typical 4 or 5 bedroom home so if you choose not to stay in the NDIS system you can easily rent it on the open market or sell it. 

The cost of land is the main variable in the cost of the property.

s

Get Started With $85,000

To get going all you need to cover is the a 10% deposit, the typical costs of stamp duty and legal fees, as well as the onboarding fee. All the other costs can be covered during construction.

In as little as 6 months your property is completed. Rent before costs at the low end is $57,098 a year so your yield is starting at 10%. Your return on cash after costs is 29% at the low end to 75.6% at the high end.

how to clear $25,410 – $64,241 a Year

I understand that I am setting an appointment to discuss an investment into an NDIS property. I understand and accept the fees and charges as detailed in the video if I choose to move ahead.

What safer place is there to be right now than in a government funded investment program like the NDIS?

t

What Does it Cost to Invest in an NDIS Property?

These investments are within reach of normal investors. We have done properties that are tenanted for as little as $495,000. Ultimately, the price point is driven by the cost of land in the area we go into. Some areas you are looking at as high as $700,000.

Land: $187,000
Build: $348,895
Total: $535,895

Stamp Duty: $4,970
Legal Fees: $2,300
Typical Costs: $7,270

Onboarding: $7,990
Tenanting: $6,600
Interest: $10,000

Total Development Cost: $567,755

Cash Needed

10% Deposit: $53,590

Stamp Duty: $4,970
Legal Fees: $2,300
Onboarding: $7,990
Tenanting: $6,600
Interest: $10,000

Total Costs: $31,860

Cash/Equity Needed: $85,450

Minimum Cash Needed

Cash/Equity Needed: $85,450

Less the pay as you go expenses

Interest: $10,000
Tenanting: $6,600

Minimum Cash/Equity: $67,850

LMI: $9,437

I understand that I am setting an appointment to discuss an investment into an NDIS property. I understand and accept the fees and charges as detailed in the video if I choose to move ahead.

How do we guarantee tenants?

100% of our properties are tenanted thanks to our approaching of putting tenants needs and wants foremost. This program is designed to give participants independence and choice. Anyone guaranteeing tenants is misguided, however when you create the houses they desire to live in, in an area with an established demand for housing, tenanting a property is straightforward.

Z

Supply Priority #1

In certain areas the care organisation already have SDA onboarded participants needing housing or they are currently in the process of onboarding tenants and they are needing housing supply created for them.

Z

Supply Priority #2

Care organisations already work with participants in certain areas, who are elegible for SDA housing but not begun the approval process yet. This is often due to a lack of avaliable housing. Housing is built to order for these participants.

Z

Supply Priority #3

Areas of known housing support demand but there is no existing relationship with participants. Advertising is run with example properties and applications assessed before bringing together an accommodation package. 

Step #1: We only ever put together a housing package in an area with a known demand.

Step #2: We only ever present properties to investors that have a signed expression of interest (EOI) from a care organisation to support clients into the home.

The Types of Properties That Will FAIL… And Why

The companies building theoretically high yield houses, make the mistake of forgetting about the people involved. When you build for the top theoritical returns that you can mathematically get on paper, you create fundamental flaws into your investment. 

Problem: expensive build. All the additional special features that need to be installed and structural supports built into the frame for things like hoists in the bedrooms.

Problem: low valuations. From what I can see, they aren’t ripping people off but they are over engineering the homes and that drives up the costs.

Problem: borrowing is very difficult. Investors usually need to tip in massive amounts of cash, usually around $300,000.

Problem: people don’t want to live in big group housing. That message is  very, very clear in every survey of NDIS participants. 

Problem: the care organisations want to put people in them either. As a result, they aren’t directing tenants towards them.

Problem: low future value. Who wants to buy a property from you that looks like a nursing home?

So investors with these properties are going to pay over the money to get in and get under the money to get out. Not an exciting prospect in my book.

I understand that I am setting an appointment to discuss an investment into an NDIS property. I understand and accept the fees and charges as detailed in the video if I choose to move ahead.

How Many Potential Tenants Are There?

Currently there are around 16,000 people in accommodation that is inappropriate for them, because it doesn’t meet their needs, they are isolated from the community, and they really have no choice.

The summer foundation, estimate that there will be an additional 33,000 people who will come out of the woodwork and join the NDIS program.

That’s potentially 49,000 people needing accommodation.

“The National Disability Insurance Scheme (NDIS) is the single biggest opportunity to stop young people going into aged care, and to get those currently in aged care into more appropriate housing.

We need to keep building on recent successes. Accessible housing is being created, but not fast enough. The NDIS, health and aged care systems are working more effectively together, but still not hand-in-hand to stop this group falling between the cracks.” – The Summer Foundation

Is The NDIS Here to Stay?

The NDIS is a massive social welfare program, for very vulnerable people. This is a long term problem, that is clearly here to stay, and the government is implementing a long term and very strategic solution, to meet this need.

Why It’s Here to Stay

Reason 1: it’s already passed into law with an agreement between the commonwealth, sate and territory governments.

Reason 2: both sides of government support the program and see it as important. Originally proposed under Julia Gillard Labor government it’s been committed to under the latest Scott Morrison government

Reason 3: it saves money. This cost isn’t actually new, it’s already costing them more money to provide the service in other areas of the federal and state budgets.

Reason 4: It wins votes. The government who try to cancel this not only costs the Australian voter more money but they are the ones who took away support for vulnerable people. Not a vote winner.

I understand that I am setting an appointment to discuss an investment into an NDIS property. I understand and accept the fees and charges as detailed in the video if I choose to move ahead.

A government funded investment program like the NDIS is a sensational way to grow a positively geared investment portfolio. Especially in an uncertain market like we have right now.

Source: Specialist Disability Accommodation (SDA)- Provider and Investor Brief. April 2018

Is SDA funding here to stay?

Yes. SDA funding, under the NDIS is a legislated commitment of Australia’s Commonwealth, State and Territory governments, set out in the NDIS, SDA Rules (2016), under the NDIS Act (2013). This legislation provides the foundation for government’s long-term and firm commitment to SDA funding under the NDIS.

Beyond the legislative commitment, SDA funding enables eligible participants to achieve better outcomes, while representing value for money for the NDIS.

This is due to high-quality, fit-for-purpose dwellings, making it easier and less expensive to provide the range of person-to-person supports, that SDA eligible participants require.

Improved design in SDA dwellings can reduce person-to-person support needs, and allow for choice in models that utilise shared supports.

Broad benefits to all parties, including participants, providers and the NDIS, underpin the long-term commitment to SDA funding.

Which Option costs less?

Why would a health insurer (who is footing the bills) offer a private hotel room for 3 nights, as an alternative to a hospital room?

This is an obvious example that “fit-for-purpose” dwellings are much cheaper than hospital rooms. If the Park Hyatt Hotel was offered as a money saving alternative to St Vincent’s Hospital by a health insurer, that tells you a lot about the cost of a hospital room. Hospital rooms need to be setup for every possible situation so the majority of features aren’t used by most patients… but you pay for them anyway. Fit-for-purpose dwellings ONLY need the services for their purpose so they are an obvious and easy way to save money.

This is why the NDIS sees the the SDA housing as representing “value for money”. This is a massive money saver for the government.

Additionally, because the tenants are appropriate accommodation they are able to take on more of their own care. This means less hours of carer time is needed which again saves the government more money.

This also means that care can now be delivered less expensively because it is not delivered by highly trained nurses. Your NDIS tenants don’t need nursing care, they just need help navigating certain areas of life. The people delivering the care have a lower hourly rate than nurses so this program saves the government money.

how does the cash flow work?

I understand that I am setting an appointment to discuss an investment into an NDIS property. I understand and accept the fees and charges as detailed in the video if I choose to move ahead.

Full Pricing Table

Source: Specialist Disability Accommodation Provider and Investor Brief

What’s The Catch?

Where Too From Here? How Much Does It Cost To Work With Us And Get Into An NDIS Property?

I understand that I am setting an appointment to discuss an investment into an NDIS property. I understand and accept the fees and charges as detailed in the video if I choose to move ahead.

We get use our money to not only make a spectacular profit but to also make life better for others at the same time.

Frequently Asked Questions

Do you ever build High Physical Support homes?

Absolutely, however this is usually “done to order” because a care organisation has specifically requested a home.

Generally speaking, if we do not purchase these homes ourselves, we offer these homes to investors who fully understand the downside of these investments but are prepared to accept those for the higher cash flow they will get.

The downside is that they are building a more bespoke home to allow for wheelchairs so the bathrooms, corridors etc. are a little larger than normal. These are still a relatively regular 4 bedroom home but as you'd imagine, you can notice the additional features on a casual inspection of the property and this may slightly impact the future sale value. Having said that, these homes still value well when applying for finance so we do not anticipate a significant reduction.

Rather than building big 5 bedroom homes, these houses are designed for 3 tenants with an overnight carer and the current ones we are building are a $520,000 package. These investors will clear (after costs but before interest)

Two tenants: $76,672 a year
Three tenants: $111,317 a year

That's anything from a 14.7% to a 21.4% yield. Clients going into these are happy to receive for building this style of home. They see that level of return over a decade or more as more than compensating for the homes potentially being worth $10,000 to $20,000 less when they are sold at some point in the future.

Who are the care organisations you work with?

We partner with several care organisations around the country, some are private, some are ASX listed and some are not for profits. They have asked us to only share who they are with our clients who they will be working with directly. They ultimately don't want to be fielding calls from a bunch of individual investors calling them out of the blue. Their focus is caring for people with disabilities, not managing investor questions. They simply aren't equipped for that and don't get involved with the property side of things at all (they usually don't understand it all really).  Ultimately they just want ready-made properties for their clients, they really want to stay away from the investment and property development side of things which is why they work with us to handle that side of enquiry for them. 

Who manages the property and collection of rent? Does it get paid directly by the Federal Government?

The company who is tenanting and then managing the property handle everything. They do the monthly submission to collect the SDA payments according to the number of tenants you have and the payment category they are in. They also collect the Reasonable Rent Contribution (RRC) from the tenants. This is then forwarded to you or account monthly (less their management fee of 16.5%). They also do the annual audit of the property that is required too but this is not an additional fee as it is covered by their management fee.

Your experience of it is very passive, it's mostly hands free except for the annual rates and insurance bills etc. 

Are these properties stand alone properties in other residential areas, or they are in a complex?

Definitely stand alone houses. If you enter the duplex/villa arena you get much less rent. As an example, 2 tenants in a villa/duplex you get $15,696/ tenant. For a house you get $22,922/ tenant. That's $14,452 a year less. 

Are the properties easily accessible to public transport?

The care organisations have a matrix of requirement for the properties and we need to meet these before they will sign an EOI for the property. Easy access to transport is just one of the many requirements that we need to meet. 

Are the build contracts turnkey contracts?

We much prefer the term "ready to rent". Turnkey is a much abused term in the building world and can in fact represent a very low level of finish (i.e. no clothesline, mailbox, gardens etc.). Our build contract inclusions make sure that there is nothing else that's needed for the property (i.e. no more money to spend). You of course get to go through this contract in detail with your lawyer during the cooling off period, just like you would for any property.

Are the build contracts fixed price contracts?

The term "fixed price contract" is used very loosely by some builders. They will say they have a fixed price, but then within the industry standard build contract they have a clause that allows for variations... so clearly the price is not fixed if that's the case. Our contracts have no variations allowed. This is one of the advantages we have when we are operating on a wholesale level with the builders, we get wholesale terms like this.

Is there a guaranteed build time on the contract?

Yes, there is guaranteed build time of 20 weeks on the contract. Most importantly this comes with significant liquidated damages for going over time. These damages are set to market rent. With most build contracts there are no liquidated damages or they are very low, like $20 a day. In this situation they can run 6 months over schedule and it costs them just $3,640, which is hardly a motivator to get the job done. We've never had a build run overtime, in fact builds are frequently completed in 18 weeks. 

Who finds the tenants and once they tenants are in the house who manages them?

The same organisation who recruits the tenants, manages them into the NDIS/SDA programs and they also continue to manage the relationship and the properties. They want a unified end-to-end process for the tenants so they have a single point of contact. They charge a one time tenanting fee to find and onboard these tenants for you and this is determoned by the category of tenant and the number of tenants.

Improved Liveability: $6,600
Robust: $7,700
Fully Accessible: $8,800
High Physical Support: $9,900

For subsequent tenants it's 25% less for each one. For example with 3 improved liveability tenants you pay…

Tenant 1: $6,600
Tenant 2: $4,950
Tenant 3: $3,712.50

Total: $15,262.50

Income generated from these tenants: $72,400 a year.

The tenanting fee is only paid after they find a tenant for you and you accept them as a tenant for your property.

 

Is there any way to guarantee I get tenants?

There is absolutely zero guarantee that we will get tenants, it's simply impossible to do that and anyone doing this is to be avoided. However, we have mitigated that risk as much as possible we believe and thanks to this process we have 100% of our properties tenanted. When we put a property together the steps are...

  1. Coordinate with the care organisation and meet the need where they have existing demand
  2. Test demand in new areas by placing ads to get interest or applications from tenants. 
  3. After establishing demand we package we first need to find land that comply with the NDIS specifications
  4. After identifying sites we then need to confirm that the location meets the requirements of the care organisations
  5. Determine the right house design wanted by the care organisation can be placed on the land.
  6. Get a signed Expression Of Interest (EOI) on the property from the care organisation.
  7. Present property package to our investors (i.e. you)
  8. Take sales advice deposit from investor.
  9. Have the sales contracts for the land and construction drawn up from the land developer and the builder. Note: we have fixed price contracts with zero variations allowed to eliminate any surprises during construction.
  10. Contracts signed and returned to the builders and you enter the standard finance period before moving onto unconditional.
  11. Upon moving to the unconditional phase the care organisation begins the process of getting tenants onboarded into the SDA. This gives them about 6 months to have tenants prepared. 

What we say to our clients is that the absolute last resort, their ultimate "back up plan" is that the house can also be rented on the open market. Yields would be about 5.5% usually... but we have never had to fall back on this option. The demand right now, is very strong, especially in Queensland as the program is quite new and there are many more participants than properties.

Can you guarantee my property will be SDA approved?

Absolutely yes. This is warranted within your build contract.

Both your land and house will meet the standards for the SDA and will be onboarded into the program. The onboarding fee is paid at the unconditional phase of your build contract.  

I’ve heard that NDIS properties are overpriced?

Some are that is true, however more often than not the issue is that properties are over captalised for a certain area.

If you build an $800,000 home is a suburb full of $650,000 homes you will definitely have problems with your valuations being out by 10% to 15%.

Usually the properties that fail to me their valuations by this kind of margin are the more expensive houses ($750,000 and above) which are built like mini-hospitals to take 4-5 High Physical Support tenants. They are very big homes and require a lot of special features and that naturally pushes up the cost.

The problem is that these features push up the cost of the build but make zero difference to its valuation, and as a result valuations come in very low.

We like to allow for a 5% discrepancy in the valuation. Please see the video on the valuation process that explains why the houses have a problem with the valuations.

 


 

I understand that I am setting an appointment to discuss an investment into an NDIS property. I understand and accept the fees and charges as detailed in the video if I choose to move ahead.

Level 19 / 10 Eagle Street
Brisbane QLD 4000
Phone: 1300 852 024
Email: support@debtfreepainlessly.com.au
Gray Holdings Trust
ABN 90 095 371 433