Single Contract on SDA Investment: High Returns, Social Impact & Options Explained

Thinking about investing in NDIS housing but overwhelmed by the options? It’s common. Choosing the right investment path can directly impact your financial health and the ease of managing your investment. Many investors find themselves stuck between traditional, complex dealings or newer, streamlined approaches. Your choice of investment route largely depends on factors such as your familiarity with property investment, the time you can dedicate, and your comfort with financial management. Here’s a closer look at your main options.

Read also: Overcoming SDA Investment Challenges for Sustainable NDIS Rental Returns

What is SMSF Investment?

In the context of SMSF (Self-Managed Super Fund) property investment, a "single contract option" refers to a purchasing arrangement where the entire property transaction is completed under one unified contract. This contrasts with a more complex two-part contract, typically involving separate purchases of land and construction which under Australia law is illegal within an SMSF.

For SMSF investors, the single contract option allows this property purchase to occur, and therefore is also an option if considering the acquisition of Special Disability Accommodation (SDA) properties.

Investing Through Traditional vs. New Options

If you're considering NDIS housing investment and have a Self-Managed Superannuation Fund (SMSF), you have two primary options:

• The Traditional Route: Two-Part House and Land Contract: This method involves purchasing the land and building separately. However, for SMSF compliance, you'll need to convert this into a single contract. This conversion process can be expensive, potentially adding 15-20% to the overall property price. Additionally, expect a steeper initial investment with a 30-35% deposit requirement.
  
  
• A Streamlined Approach: Single Contract Offered by Developers/Builders: A small number of developers are recognising the potential of the NDIS housing market and are now offering SDA properties as single contracts. This simplifies the investment process significantly, reducing costs and potential delays. The additional cost for a single contract typically falls between $60,000-$70,000, with a more manageable 20% deposit needed.

Why Opt for a Single Contract property for your SMSF Property Investment

Single-contract purchases are a straightforward option in scenarios where investors want to avoid the cumbersome and expensive process of converting two-part contracts into a compliant format for SMSFs. This approach can be particularly attractive when developers offer ready-made single contracts for apartments or villas, allowing SMSF investors to more easily going through the investment process.

The Advantages of the New Single Contract Option

• Cost Savings: Compared to the traditional two-part house and land contract method, the single contract option offers substantial cost savings, making NDIS housing investment more accessible.
• Faster Process: The single contract eliminates the delays and complexities associated with third-party conversions, streamlining the investment journey.
• Accessibility for Smaller SMSFs: The lower deposit requirement with the single contract option makes SDA investment a more realistic proposition for smaller self-managed super funds.
• Quick Transactions: Single-contract properties often have a faster settlement process, which is advantageous in securing investment opportunities quickly and reducing holding costs.

Additional Consideration

• The Traditional Routes: The traditional two-part house and land conversion involves multiple parties and lawyers, which can lead to delays and frustrations.
• Inherent Investment Complexity: By its nature, SMSF property investment combines the complexities of SMSF regulations with those of SDA requirements. Be prepared for a thorough due diligence process to fully understand the investment.
• Financial Buffer: Consider having a buffer over and above the required deposit of at least $100,000 in your SMSF. This buffer will cover additional expenses like furniture packages, initial vacancy periods, and other upfront costs such as provider engagement fees and participant procurement fees.

The Allure of NDIS Housing Investment

For investors seeking a stable and socially impactful investment, NDIS housing presents a compelling proposition. Here's why:

• Reliable Returns: The NDIS program ensures participants have secure, long-term leases for their SDA dwellings, for up to 20 years. This translates to predictable rental income for you as the investor.
• Enhanced Living Conditions: By streamlining the investment process, more investors may be encouraged to fund SDA properties, increasing the availability of high-quality, purpose-built housing for people with disabilities.
• Unrelenting Demand: Australia faces a significant shortage of SDA properties. The NDIS program is constantly expanding, and with it, the demand for suitable housing is only expected to rise. This creates a strong market for investors with strategically located SDA properties.
• Social Impact Investing: The development of more SDA properties can lead to greater community integration for people with disabilities, providing them with opportunities to live in mainstream housing environments.

Taking the First Step Towards Impactful Investing

NDIS housing offers a unique opportunity to create a positive social impact while achieving your financial goals. If you're considering an SMSF property investment, carefully weigh the advantages and challenges of both options. Investing in NDIS housing through a single contract is a smart move for those seeking efficiency and reduced costs. If you're ready to explore this streamlined approach, NDIS Property Australia is here to help.

Contact us directly to discuss your options with our experts. Make your investment journey easier and more profitable with NDIS Property Australia.