Should I invest in a SDA Apartment?
High Supply of SDA apartments forecast to come to market
What we continue to notice is the sudden emergence of apartments being advertised as NDIS apartments for sale.
It got us thinking why? And on review what looks to be the case when you scratch away at the surface is that there are a lot of apartments developers have just built or close to completion which have not been sold yet. So these would be those last few which didn’t suit an owner or an investor. If it were not ‘labelled’ NDIS compliant you would not give it a second look at.
This got us thinking further and an interesting discussion we shared with a SIL provider, who raised a very pertinent point in that when a Participant is audited for SDA qualification, they are allocated $xxx dollars towards their SDA package. This is the only amount that they have and can use to become one of your participants.
Advertised Income very high but what is the actual income received?
As an investor considering SDA property did you know that a participant has to qualify under the NDIS to receive a SDA allowance, and the vast majority receive a lower amount which does not suit by way of example a 1 x HPS + OOA budget.?
What this means to you is that their SDA package may only suit a 3 participant SDA dwelling, and we hear that most only have sufficient SDA allocation to suit a 3 x participant dwelling. So you will have a financial shortfall when trying to source a HPS participant.
What that means to you the investor is that if you have an apartment (and there are loads of them coming to the market). Say a Single Participant Apartment could attract up to $xx yield which the marketing company is quoting to you …. in reality in all likelihood, according to the statistics, you will only attract a lower yield SDA Packaged participant as per table below. When investing in an apartment you would want to base your returns on a lower amount when making your decision. If happy with those numbers and if you do attract a higher packaged participant, then that will be a wonderful bonus for you.
Statistics state not likely, but if your apartment is empty, you will grab any participant you can, even at a lower amount. Yes or yes?
Numbers used are for demonstration purposes only and can vary, these figures do not include $9,761 MMRC.
Due to a high number of apartment supply under NDIS, and more importantly a very small % of SDA packages being approved up to this level of funding, a major national SDA Provider is talking 35 vacant apartments out of 140 NDIS apartments on their books. This is a significant rate of SDA properties who cannot find participants earning $0 income! A statistic you do not want to be apart of.
Buy on Greed or invest on probability?
What the above is demonstrating is an inner city/suburb apartment (where most are being built in Australia) at the maximum possible SDA package looks incredible, in fact looks “too good to be true!”
But we also know as per NDIS statistics that the majority of SDA participants qualify for lower funded SDA packages.
So what this means to you is that you should undertake your research in far more detail. You would want to be conscious that a marketer advertising a SDA apartment demonstrating incredible yields of $90k to $120k per annum.
If you include the MMRC of another $9,761 the numbers they will use to appeal to your sense of greed go up to $100,000 to $129,000 per annum. Freaking Great! But what are the realistic chances of finding that needle in a haystack?
The recent NDIS 20-21 Q4 report and the Summer Foundation SDA Supply Survey Jan 21 here, talk about the looming high supply of apartments. Be wary.