How Long is a SDA Property Guaranteed for?
There is no Guarantee, how it works is once a new built dwelling receives it’s compliance certificate, that dwelling is treated as a new build under the SDA Pricing Guide and is Classified as one for 20 years
You can read more here on the NDIS Government Site
SDA Pricing Model
In Summary, the time frame for the pricing has been aligned with the expected investment horizon of institutional investors (20 years). To recognise the uncertainty associated with retaining participants for more than 20 years, the property would revert to the general market, providing a lump sum cash flow to the investor equal to the (non-SDA) market value of the property … as quoted in the Specialist Disability Accommodation Decision Paper
Which goes on to say : When combined, the revenue from SDA payments, Reasonable Rent Contribution (RRC) and the sale value of the property will be sufficient to recover the initial investment, all maintenance, outgoing and management costs, and an ‘institutional’ return on debt and equity.
The New Build pricing will only apply for a period of 20 years. At the end of the 20-year period, if the property remains occupied, the pricing will revert to Existing Stock prices, which will provide a superior return to the general rental market and encourage property owners to retain the property as SDA.
What happens after the 20 years?
Keeping in mind we are referring to a NDIS / SDA Property which was built as a complient new build SDA Property, after the initial 20 year Classification achieving maximum rental yield under the NDIS program, the dwelling on paper converts to a normal dwelling which may still be home to participants and receive a reduced rental subsidy from government which would remain higher than a standard dwelling next door rented out to a family under normal rental conditions.
What this means to you the investor is that during the 20 years your investment achieved an extraordinarily high rental yield anywhere from around 7% up to around 20% pa and after this period it will continue to achieve higher than market yields for you the owner.
What other investment vehicle out there with as low a risk profile that SDA Property or otherwise known as NDIS Property will return your investment over 10% per annum, for over 20 years, linked to CPI where the underlying asset remains the bricks and mortar property?