Is Investing in Disability Friendly Housing Worth It?

Investing in disability property is a socially minded investment that, when done well, can benefit both investors and the community. The National Disability Insurance Scheme (NDIS) and its Specialist Disability Accommodation (SDA) initiatives provide Australians with disabilities the opportunity to live independently in properties tailored to their unique needs. For investors, this means entering a specialised market with potential rewards, but there are also significant risks to consider.

Investing in SDA properties offers a unique chance for investors to generate income while also supporting a wider social cause: providing essential housing for people with disabilities. Tenants are backed by government funding, but investors must also be prepared to navigate the specific challenges inherent in this type of investment.

Potential High Rental Yields, But at Higher Initial Costs

SDA properties are distinct due to the specialized design features needed for tenants’ daily living. These homes typically require larger spaces, accessible bathrooms, and custom-built layouts tailored to individual needs. As a result, initial construction and renovation costs can be substantially higher than for conventional properties. While tenants receive funding from the government, this funding ceases when the tenant leaves.[1](Home in Place, 2023).

The upside is that SDA properties can see higher potential rental yields due to high demand, and longer lease terms. Rent may also be subsidised by the government as part of the Commonwealth Rent Assist [2]( API, 2022). Like any investment, returns aren’t guaranteed and there’s an inherent risk. It’s worth consulting an expert to make sure this is the right call for you.

Long-Term Tenants, But Expensive Vacancy Risks

SDA properties can have high demand, which may lead to long-term leases. Long-term leases are a reliable source of passive income. And turnover of tenants can be less frequent than other rental properties. However, if you do find your property vacated, filling it may take longer, which could be costly, especially if you’re covering maintenance costs for a vacated property. The SDA Alliance reported vacancies as high as 20% for houses and 5% for apartments in 2023 [3]( SDAA, 2023), making location a critical factor in minimising risk during your investment search.

Government-Funded Tenants, but Policy Risks

One of the most attractive aspects of SDA investments is the secure rental income provided by tenants who receive government funding through the NDIS. This support allows tenants to cover rent and additional costs, making their residency more reliable. However, it’s crucial to note that the funding goes to the tenant, not directly to the landlord, and SDA properties are not “government-funded investments” as some may claim [4](CAV, 2024).

Despite the stability offered by government involvement, there is always the risk of policy changes. Since your investment is tied to the NDIS and government regulations, any future adjustments to funding structures or eligibility could negatively impact returns, and the stability of your investment. Keep up to date with the NDIS’s current policy and any statements.

Potential Tax Benefits vs Ongoing Maintenance Costs

SDA Properties may offer attractive taxation benefits, such as property depreciation deductions on the building and any fittings. Meeting specific accessibility standards can lead to further deductions, enhancing profitability in the long term.

However, ongoing maintenance costs can be higher than those of standard properties. These homes require rigorous upkeep to meet safety and accessibility standards, which may include structural modifications and frequent inspections. If a tenant vacates, the property’s accessibility features may need to be reconfigured for the next tenant, adding to the maintenance costs [5] (API. 2023)

Is NDIS / SDA Housing Worth the Investment?

For those looking for a quick, low maintenance investment that is hands free, NDIS property may not be the investment solution for you. SDA investments require a long-term commitment and the willingness to prioritise residents’ needs. However, with the potential for higher returns and the support of government subsidies, investing in the right SDA property, in the right location, can be financially rewarding while making a meaningful impact on the community.

Before making any decisions, it’s essential to consult with experts and conduct thorough research to ensure this type of investment aligns with your financial goals. Speak with your local MoneyQuest mortgage broker to explore if disability-friendly housing is a smart investment for you.

[1] Investing in NDIS Housing Home in Place, 5 June 2023. read 30 October 2024

[2] Feel good about your investment portfolio with socially responsible investing, Australian Property Investor 12 January 2022. Read 30th October 2024

[3] SDA Pricing, SDA Alliance. Read 30th October 2024

[4] Rental payments in SDA, Consumer Affairs Victoria. Read 30th October 2024

[5] NDIS property investment risky but rewarding, Australian Property Investor, 9th February 2023. Read 30th October 2024

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