What investment property suits a SMSF structure?
A property that offers your SMSF a high yield, to cover outgoings and pay down your equity, or use the extra income to invest elsewhere, is a strategy worth following according to financial planners and accountants we have spoken with.
As a trustee, it makes investment sense to broaden your investment outlook and consider other investment vehicles (property types), which have the propensity to provide your SMSF with sound returns and include this in your SMSF’s investment portfolio.
You may have heard of NDIS Property ?
The correct name is SDA Property (Specialist Disability Accommodation) which falls under the incredible NDIS Programme. You can read more detail on SDA property here.
Having said this, we urge you to be extremely cautious as there are a lot of marketing companies coming to market just wanting to sell investors anything that has the label “NDIS” on it and there is so much you need to know and want to avoid, because if you as the trustee of your SMSF get it wrong … your SMSF will pay a heavy price over the life of your investment.
To qualify, when you work with consultants such as properT network, who look after you our client, we will educate you to the point where you will make an informed decision. This is the stage when you get to know what it is that you don’t know, that you don’t know. NDIS Property can be complex, the high yields being touted are spruiked on paper and reality, when you understand the opportunity will in all likelihood be very different. Yet still returning 10% or more for your SMSF.
It is thus crucial to understand the nature of these SDA Properties under the NDIS, before investing in one.
Build “fit for Purpose”
When you secure a block of land that meets the NDIS purpose for location and you build a generous purpose designed and built floor plan, you will attract participants sooner and hold onto them longer. Sadly, most investors are attracted to the high yields and the sales companies are telling them exactly what they want to hear and they soon enough put pen to paper. Before you sign anything, reach out to us to review their offer to you and we will provide feedback which can be verified, and also share questions you would want to ask that sales and marketing company, so that you can be more informed.
Unlike other investment property, SDA Property is not the actual investment. Turn your thinking on it’s head and look at it from the participants perspective, this is the person who will be living in your SMSF’s property. If you provide a floor plan that is cramped and or a location that is unsuited, they will not come. If they come, they will not stay and move out as soon as something purpose built with the participant in mind comes to market.
Very few locations are well suited to NDIS Property. Would you know where to invest? Without participants, you own an expensive paperweight!
Your SMSF’s income, comes from having a participant or participants who choose to live there because of well suited locations and generous floor plans. This is where you income is coming from, meaning it is imperative that you deliberately choose to build “fit for Purpose”. If you are unsure, reach out to us and we will share the intricacies and complexities with you. Our strategy over the past two years since we added SDA Property to our portfolio of property offerings has always been to build with the end user (the participant, their families and their carers) firmly in mind, and to date we remain successful with this strategy.
Every week we receive several packages from prospective clients who are about to sign a contract, and over 80% of what we are seeing is UNSUITED!
When you turn this excellent initiative and investment opportunity on it’s head and you too now identify to find a participant led model that is actually going to give you the income, you are the typical client we love to consult and work with.
Where you will have borrowings, your SMSF will need to secure a single contract property, read further here. We have a working model to overcome this. The NDIS prefer and incentivise a new build which meets current NDIS stringent standards. If someone is selling an already built SDA Property, look at it from all the angles, and ask why would someone sell the Goose that is Laying the Golden Egg??
Not all property suits a SMSF and not all NDIS Properties are worthy of investment.
Do you know how to identify which are??
Read more on Why a NDIS Property suits a SMSF investment strategy here
What to be very mindful of when wanting to invest in a NDIS property – read here and watch the video