Match the investment vehicle to your Purpose for the Investment
What locations need NDIS Property
When assessing SDA property, a concept that gets lost in the assessment is Location.
We tend to relate location to where we live, because this is “what we know”, OR we analyse it to “where we would invest for growth”.
Yield Strategy
If you are investing in SDA property, it is first and foremost for Yield, so the above goes out the window unless you apply emotion to your decision making. And the reason it goes out the window is the purpose of an NDIS Property investment, is to generate and harness the yield.
As an ex-financial planner with 15 years experience, (which I gave away as the financial planning products just did not suit my client base), and now with a further 16 years as a Consultant in the property space, because I have always owned and invested in property I understand that it is “THE NUMBERS WHICH DRIVE AND UNDERPIN MY INVESTMENT”, that play the only role in my investment decision making – where I deliberately match the investment vehicle to the goals, purpose and outcome I want for that investment.
What makes for ‘improved Investment Sense’?
This vast combined experience of over 30 years, opened my eyes to the power of the NDIS yield, and it is how I reinvest the Yield from my SDA Property, where I will accelerate my financial planning goals.
By way of example, most people we consult with say they want capital growth from the investment. I ask “In a normal market, how much growth would you be content with?”, and they reply “5% or 7%”.
Ask us to explain and demonstrate to you, how if you harnessed the yield from the NDIS property and reinvested it in say another property, those funds could be achieving 35% to 40% for you the investor. It is just not rocket science to understand this. Accepting it can be a challenge for you though.
So we ask again “would you prefer 7% compounded growth from a property, or having the same $’s invested earning you over 30% per annum, compounded over the life of the investment?” …. no brainer is it?
How does location determine the yield?
Location will determine the yield you achieve from a SDA property, so why invest locally or where you know, where land value is already high, and ensure you receive a lower yield. Just because you “know the area?”
You and I know that whenever we include emotion in any investment decision, we are guaranteeing ourselves a lower return on investment … but only 100% of the time. Investing making a comfortable decision includes emotion. The result is comfortable returns. Then NDIS is not for you, as the returns are extraordinary and the investment decision requires you stepping out of your comfort zone, so that you can achieve improved results, by coming to an informed investment decision.
Challenge yourself, so that you can achieve improved results.
Making a comfortable decision
We tend to default to what we are comfortable with, then question why we keep getting the same results??
Investment devoid of emotion, results in higher returns (exact same risk), and with higher returns compounded over the life of the investment and or reinvested, will ensure you have more $’s in your life’s portfolio. Match the investment vehicle to your goals, your purpose for the investment and the results you want to achieve.
Where should I invest?
With SDA Property, an astute investor will reflect on the following :
- The revenue is the same whether I invest in a 2 star location or a 5 star suburb.
- Land price will determine my yield.
- If I elect to leverage and secure say an 80% loan, the 20% that I am investing can work for me at a lower return on investment in a more expensive suburb.
- Or much harder for me in a suburb where there is the same demand and land values are lower. NDIS yield will be the same.
- Now compound this difference over 10 or 20 years, the amount will astound you!
- Especially if you elect to reinvest the yield you receive.
- The location needs to be influenced by demand within the NDIS sector, where the participants are living and want to continue to live.
- The locations we focus on, we understand the level of demand in those areas.
- That suburb is not going to be your first or second prize if you were investing for growth.
- If your primary requirement for the investment is growth, SDA property is unsuited to your strategy
- We know that participants want to live close to friends and family, and detest travel and being isolated.
- The purpose of the SDA programme under the NDIS is to give participants choice of where they want to live so that they can thrive! Keep this firmly in mind when reviewing location.
- They want to live where their support networks are located and if you build and think they will come and the location is unsuited, rethink.
- Just because they have a disability, it does not mean they will uproot their lives because you have built a SDA dwelling.
- Capital growth over the life of the investment will occur naturally anyway, revert to above where we explain it is how you reinvest the income, this is where you will maximise your ROI (return on investment).
- Where else can you secure a risk mitigated investment, with as strong a yield, where there is demand and it is linked to CPI for you?
- When you review the statistics you will recognise that a larger concentration of NDIS demand, are in lower socioeconomic locations.
- As land is very scarce and affordability most concentrated in these types of locations, land in these areas continue to increase in price. The sooner you secure your SDA investment the lower the cost of the land and the build.
- By way of example :
- If land is say $250k and build say $650k with 2 x HPS income at max $109,501 your yield could be around 12%.
- If land is say $150k and build still $650k with 2 x HPS income at max $109,501, your yield could be around 13.68%.
We could go on but you get the overall just of what we are sharing with you.
