NDIS Finance
How can I get a property investment loan from a lender?
This is a specialist residential asset and therefore is not fully understood by a lot of financial institutions. Some lenders have become lenient when it comes to lending money for SDA projects and property. Besides providing home loans for participants, lenders are encouraging investment loans for family, friends
or any interested investor. Since there is a 20 year rental backing from the government for SDA property, lenders should be willing to lend to investors with a deposit of 20%, but we still recommend investors have the appropriate amount of cash available to consider this opportunity.
PropertyinDemand has access to Lenders who specialise in NDIS Lending. Talk to PropertyinDemandand we can arrange a meeting with a specialist Lender or Finance Broker.
How much can I borrow?
Borrowing to build a Specialist Disability House is generally limited between 60% to 80% as this is a niche segment that is still growing. Furthermore, you might be able to borrow more if you plan to invest in a property that requires more improvements according to the SDA Design Category. In theory, you can borrow up to 80% of the total cost of land and construction. We reiterate, in the word ‘theory’ because lenders are few and far between and it’s going to take time for most lenders to open up to this NDIS sector for residential lending.
What are the challenges of getting a home loan?
Since this is a niche area of finance for lenders to be in, investors are bound to face some challenges as a borrower: The biggest challenge is banks generally do
not lend for NDIS. Usually you would need to go through a non-bank lender, and even then it can be difficult to find a funder. Then, it is rare for them to offer construction lending for NDIS. As the requirements for Specialist Disability Housing are quite specific, the cost of construction might exceed the final value as determined by an independant valuer. Other challenges to getting a home loan:
• The property is only made for a specific niche of people, so it might be harder to sell later on.
• Lenders generally do not prefer long terms leases.
• Since the property is specialised (i.e. a non NDIS participant/tenant would generally not live there), some lenders might not accept it as security.
• There could be problems with valuations as the property might be valued as a non- SDA property and will not account for the special modifications made to it.
• The construction has to be compliant; signed off by a SDA design certifier.
There could be vacancy rates if the Participant moves out, while waiting for a new tenant to come in.
What about the resale of the property?
Aside from wider passageways, and door ways and o ther features, it is very easy to turn the dwelling into one that any family could comfortably live in.
What happens after 20 years?
The investor can sell the property as per standard Real Estate legislation requirements. The investor also has the option to roll over their agreement and continue the NDIS as existing NDIS stock once the 20-year period is up. while building skills.
Can I purchase a SDA property through a SMSF?
Yes, you can. The restriction will be if you intend to borrow money to buy land and construct a NDIS approved property. In this instance, you would purchase a property as a single contract purchase. If you are intending to use cash, you can fund the land purchase and construction using cash.
What is the difference between a one-part and a twopart contract purchase?
Two-part contracts are very common when purchasing house and land packages. Buyers usually sign a contract with the land developer for the land component, and then a separate contract with the builder for the build component. Buyers are required to settle settle
on the land portion, and then pay ‘progress payments’ during construction. Progress payments are made to the builder over the course of construction to fund the works (eg: materials and labour). At key milestones along the way (eg: slab, frame, lock-up), buyers will be required to make payments based on the pre-determined percentages of the build contract price. One-part contracts are more common when purchasing apartments and townhouses. Buyers
sign a single contract, covering both the land and building component. A deposit is paid upon contract signing, with the balance of the property price paid at settlement.
