SDA Property Update Feb 2021
SDA property
Please accept this as general communications to a wider audience base based on many, many hours of telephone calls, zoom sessions, emails, questions, and discussions we at properT network have had with people just like you, and also feedback from our providers we work with Australia wide, who all have experienced, in similar conversations with investors interested in SDA Property.
The purpose being to help save you time and also to further inform you so that you can make more money from your investment. Worth the 11-minute read, you will agree after reading further.
So what is also stopping you from already committing to a SDA property, we find, is because SDA property under the NDIS can be complex with about 7 important moving parts, investors such as yourself remain uncommitted to themselves out of fear of not knowing enough or self confidence to make that decision to commit; or not having the ‘right’ team helping them through the process so that they can make an informed and confident decision. Sound familiar? You are not alone.
Current State of the SDA property market – what you need to be aware of
Who do you listen to?
- It seems more suppliers of SDA property are coming to the market, what we are noticing in general is that because they have little experience in this emerging sector, but are wanting to climb on the band wagon, their product offering have glaring holes you may want to be made aware of
- We base the above on packages clients we are working with are sharing with us. And because our clients “don’t know what they don’t know, they miss these glaring holes”
- It is thus advisable to avoid typical ‘cookie cutter’ solutions being offered, especially in that they are all in similar or the same locations. High supply leads to more rental competition in attracting and holding onto participants.
Fees
- Next, and more important than the property itself is “who will be managing the property and what are their fees?”
- NB: If the package does not come with a Licensed SDA Rental Manager as part of the solution, find one (if you can), before you sign any contracts. Without one your investment is ‘dead in the water’!
- Next, ask what their fees are before you sign any contracts! Be warned. There are some really greedy SDA rental mangers out there, it is so sad that they need to rip the system off out of their own greed.
- This will dramatically alter the amount of income you will be getting over the life of the investment by hundreds of thousands of dollars.
- Avoid being told exactly what you are wanting to hear appealing to your fear of missing out or greed of that income being quoted is high.
- Ask the hard questions before you sign.
- Allow yourself to be challenged by stepping outside of your comfort zone, so that you can make an informed decision.
Are you buying a SDA property or wanting to Invest in a ‘best fit’ solution which meets the needs of your Participants you want to attract and hold onto?
- Work with a group who are not selling you the property; meaning work with a professional group who will consult with you and help you identify investment grade SDA properties.
- Meaning if you work with professional consultants like properT network, who represent you and have your interest at heart, they will help you understand the investment, match the investment to your goals and requirements, whilst educating you so that you can make an informed decision in providing you a customised solution that is a ‘best fit’ for you.
- Marketers want to sell you something, they have stock and need to sell. This way unfortunately you stand a higher chance of earning a lot less over the life of your investment.
- Marketers tend to focus all their SDA properties in one or one similar location, resulting in you having competition in attracting and keeping your Participants (tenants). This could negatively impact your investment.
- Consultants will help match a ‘best fit’ property solution to your goals, meaning they will save you time, stress and help you make more money.
- Consultants will avoid the cookie cutter models by customising an improved solution to meet your requirements. This way you achieve more $’s in your own pocket over the life of the investment. Which is your purpose and intention for the investment, right?
- Meaning if you work with professional consultants like properT network, who represent you and have your interest at heart, they will help you understand the investment, match the investment to your goals and requirements, whilst educating you so that you can make an informed decision in providing you a customised solution that is a ‘best fit’ for you.
Vital to have a customised end-to-end offering
- Work with a group such as properT network, who have deliberately implemented an end-to-end all-encompassing Customised Solution from :
- Understanding your requirements and purpose for the investment.
- Sourcing a block of land, in an area with high demand to match your preferred strategy, yield, budget and more.
- Design a dwelling to suit the needs of NDIS participants in that area by getting feedback form local NDIS Care Providers as to what their requirements are.
- Handle the construction by tendering out the build to approved NDIS builders and working with the ones who will deliver the required results consistently.
- This group solution will at the same time be talking to the Care Providers in the area to begin the process of securing Participants, so by the time your dwelling is built you have expression of interests by participants wanting to live in your home
- Secure the Compliance Certificate on your behalf at completion so you can have access to the high yields being provided under the NDIS.
- This service is provided by a fully licenced SDA Rental Manager called a SDA Provider, who will then secure and look after the participants, manage and look after your asset, whilst ensuring they meet with ongoing compliance so that you can receive both your government funding plus the participants’ rental portion.
- All this at reasonable fees. Meaning more in your pocket.
- Deliberately designed end-to-end customised solution to save you time and help you make more money.
Property Management Services and Fees
- Current Rental Fees seen in the market
- We continually see SDA rental manager offering rental guarantees from 5%, to 8% or even 10%
- Sounds great to have a guarantee doesn’t it?
- But if someone is sticking their neck out for you, they are damn confident that they can get these participants you would have to agree. So the question is “are they are not really sticking their neck out for you; or is it a money grab by playing on your emotion of fear?”
- Their motivation is to ensure that they keep minimum 55% of your annual income, they take any CPI increases because their contract states that this is a flat rate for X number of years, whilst you continue to receive a flat rate over this guarantee period. How does this make business/investment sense?
- Meaning, you are taking all the risk, you are perhaps even taking out a loan and they will earn MORE than you? Again, “how does this make any business sense??”
- They play on your emotion of fear and insecurities so that they can earn a fortune managing many properties, whilst you the investor with all the risk, walk away with less than half of your own Income?
- Licensed SDA Providers do deserve to earn fees higher than standard residential property managers, as there is a lot of compliance work required behind the scenes, so that you get a very high yield. And managing participants also presents a higher challenge than standard tenants. So yes, they do deserve more. How much more should be realistic and around 15%. That is 15% of the governments proportion and around 8% of the participant’s rental amount.
- This is a win-win for you the investor and for the SDA Providers you would agree.
- We continually see SDA rental manager offering rental guarantees from 5%, to 8% or even 10%
What is the purpose of your investment and are you matching the investment vehicle to the outcome you want?
- What returns are you wanting for the exact same dollars you are wanting invested?
- If this was not a SDA property and you have say $150,000 to invest
- Would you go for a lower yield investment, with the same risk profile, because you can drive past it, but never visit it?
OR
- Would you use the exact same $’s invested and secure an investment with the exact same risk profile somewhere else? Let’s look at the numbers shall we :
- If you earned, with a guarantee, just 8% yield versus 14% yield for the same risk and dollars invested
- Over the life of your investment on say a value of $650k you would either earn:
- $650,000 x 8% = $52,000
- Over say 8 years fixed rate = $416,000
- $650,000 x 8% = $52,000
OR
- $650,000 x 14% = $91,000
- Over say 8 years linked to 1% CPI = $704,113
- So for the same $’s invested and exact same risk profile of your investment, investing not where you are emotionally comfortable, will give you $288,113 less income over 8 years
- Over the life of your investment that is going to be a bucket load more you would have to agree! What about all the Lost Opportunity costs over this period? Could be worth Millions of $’s to you?
- Here is the Logic – why when it comes to super, and you are contributing 9.5% of your own hard earned $’s every single month, you do not drive past all the companies your hard earned money is being invested in, you do not even know where these companies are, nor do you care if you are honest with yourself
- So why when it comes to a property you unfairly penalise your return on investment by deliberately choosing emotion over strategy; because the property is not where you live???
- Emotion in any investment decision is debilitating because you make a decision within your comfort zone and keep getting the same results you always get
- And just because the property is in the same State you live in, it does not mean it is firstly a sound investment nor does it mean you can physically visit, touch, fix or do anything to the property. Why earn less because of an emotion which is not serving you?
Are you deliberately setting up an Investment Strategy or just flying by the seat of your pants hoping for the best?
- Strategy
- Match the Investment Vehicle to your goals, your requirements, and your budget.
- Make an informed and educated decision devoid of emotion.
- This is a yield play investment vehicle; focus on the yield you want and will need.
- Capital growth is a bonus.
- Your investment is a 20-year opportunity linked to CPI, make the most of it for yourselves and your next generation.
- After 20 years, you can continue under the NDIS at what we believe is a 60% of yield at that time.
- Or you can sell the property, renovate or develop …. you have choice!
- The choice you should not have, is bringing emotion into your investment decision – it results in you earning a lot less for the exact same $’s being invested.
Summary
You have control of either earning more by making an informed and astute investment decision devoid of emotion; OR you can earn less by having a belief that does not serve you, such as the property needs to be close to where you live. Emotion whilst investing just does not serve you nor the financial results of your investment.
NB : Getting the decision wrong at the outset or making a decision from your current comfort zone will cost you hundreds of thousands of dollars in lost income/earning/investing opportunity; lost ability to use that extra income to invest elsewhere, other lost opportunity costs incurred on your journey of life!
In summary, this is a pure investment, match the investment vehicle to the purpose and goals you have in mind, that best meets your budget. And work with a professional team.
One does not buy a property for investment; you make an informed and astute decision and match the investment to your goals. Property is an Investment Vehicle which should be best suited to match your outcome you want, devoid of emotion. This is why it is an investment.
People buy a car, or a meal not expecting a return on the purchase.
If you buy a property, it is an expense or fits your current level of comfort and thus will return you results you are used to. You never walk into the bank to buy an investment, so why do so when it is a property.
Look how to maximise your Investment returns by investing in the property. A different mind set equates to improved financial results and lifestyle.
When you deliberately Invest in a property, you match it to your purpose. It is then an investment vehicle that will positively impact you going forwards, as it will for generations to come.
SDA property is an incredible opportunity to not only “Do Great by Others Less Fortunate than us, it is also a way to positively impact your future as well as your next generations future” … more positively when you get the investment decision correct at the outset!
Because there are so many vital moving parts, work with a professional who has your interest foremost at heart. Allow yourself to be challenged outside of your comfort zone to get new results you do not normally get for yourself. This way you will earn a helluva lot more, over the life of the investment. Your call to action “If this provides further clarity for you, where to from here.
