INTRODUCTION
There is an opportunity in Australia to engage in property transactions related to Australia’s National Disability Insurance Scheme (NDIS).
It is “building & holding” residential NDIS property for income and to realise capital gain on a future sale at any time.
For approved dwellings there is secure, high, Government-backed rental income around 4 times normal residential yields and 10-year lease arrangements apply.
OPTIONS
You can choose to
- * Own a property outright
- * Be a Part-Owner
- * Be a Development Partner with Ricard
INVESTMENT OBJECTIVE
Acquire and manage disability accommodation properties that meet the specific requirements of Australia’s National Disability Insurance Scheme (NDIS) participants to
- * capitalize on the growing disability accommodation market
- * generate predictable and stable income streams underwritten by Government
- * in addition to financial returns, provide a positive social impact
This is suitable for investors seeking exposure to property assets that generate stable and predictable income plus capital gains and coupled with a socially responsible investment focus.
To achieve the stated objectives, you benefit from Ricard’s connection to a team of experienced key associates with relevant skill sets and experience as
- * Accredited SDA providers
- * Valuers
- * Financiers
INVESTMENT SUMMARY
1. General Note
The most important challenge in any investment is to manage risk and every aspect of an investment opportunity needs to be looked through that lens.
Investment returns are always uncertain and can be influenced by factors beyond anyone’s control. However, underlying risk can and must be identified so that it is reduced to acceptable levels.
Over many years of securities dealing and advising institutional and private clients, Ricard has run a hard ruler over countless investment offers and this coalface experience in identifying failure points underpins every aspect of its approach.
2. The Landscape
The current demand for NDIS dwellings far outstrips suitable supply. Based on our research into official published NDIS data and detailed analysis of planning approvals for NDIS dwellings, it is likely that there is an approximate a two-to-three-year window where there’s opportunity for investors to extract valuable favourable concessions from NDIS providers around fees and lease terms and conditions, especially tenancy timing and lease periods,
3. Risks
We’ve undertaken nine months of preparatory research and enquiry. Though this is a usual residential property play, potential potholes need to be addressed.
3.1 Obvious ones and how they are addressed are
- Timing of the build phase and potential cost over-runs and delays
- The key to this is identifying the best counterparties. We deal only with a handful of accredited NDIS service providers and well-funded specialist builders. Fixed price and time build contracts are put in place to ensure there is the most efficient process.
- Interests and activity of several parties need to be managed and coordinated
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- * the builder needs to deliver on budget and on schedule
- * the NDIS service provider needs to place the client in good time and
- * the investor needs the targeted return
The stresses of this situation are handled through close co-operation.
Occupancy and Vacancy
Pre-lease agreements can be negotiated with service providers. Not just vague promises to find a client but commitments to perform.
Lease terms are 10 years + so normal vacancy risk is low but investment safety lies in the ability of the service provider to find a replacement tenant should some event cause an unavoidable vacancy.
3.2 Not so obvious ones and how they are addressed are
Chase for lower cost dwellings to increase rental yield.
The market is flooded with offers to the uninformed, of low entry cost to a valuable income stream. The reality is that developers look to sell lower price dwellings to attract buyers.
By their nature, NDIS properties are more expensive to build. Not much can be done to reduce or cut corners on the build cost but there’s scope to build on cheaper land. This attracts developers like flies to honey and as a consequence there are several regional locations in Australia where a glut of NDIS properties is under construction.
There is a significant risk these will never be capable of being successfully tenanted and buyers will be left with idle specialised properties to be tenanted by non-NDIS residents.
The result – potential yields of 1% to 2% due to the higher build cost and the lower normal residential rent.
3.3 A cottage industry servicing huge demand
Leaving aside established and well-resourced participants, service providers form a cottage industry and from the perspective of a serious investor or Fund, smaller participants are to be avoided
Here is a snapshot of the current situation
