How to Use Your SMSF for NDIS Property Investment: Costs, Market Trends, and Next Steps

Benefits of using SMSF Property Investment for NDIS Housing

Investing in an NDIS property through your self-managed super fund (SMSF) offers unique benefits for investors looking to secure steady, long-term returns. Unlike traditional real estate investments, SDA (Specialist Disability Accommodation) properties provide high yields and consistent rental income backed by government funding through the NDIS.

Here’s why this strategy works so well:

1. Strong Rental Yields
   NDIS properties often deliver rental yields significantly higher than traditional investments, with average gross returns ranging between 8% and 12% annually. This cash flow can make SMSF investments particularly appealing, especially as the income generated helps cover loan repayments and holding costs.
2. Limited Recourse Borrowing Arrangements (LRBAs)
   SMSF loans for property investments operate under limited recourse rules. This means your personal finances remain separate from the loan, reducing risk for investors. If the property doesn’t perform as expected, the lender can only recover their debt against the property, not your other SMSF assets.
3. Government-Backed Income Stability
   SDA housing operates within the NDIS framework, ensuring reliable funding and long-term tenant leases. This level of income security is rare in the property market and can give SMSF investors confidence in their returns.
4. Tax Advantages
   SMSF property investments offer considerable tax benefits. Rental income is taxed at just 15% within the fund during the accumulation phase. Once you transition into the pension phase, the rental income becomes tax-free, maximising your returns.

By combining high rental yields, lower taxation, and income stability, SMSF property investment provides an effective pathway for investors seeking financial security while supporting SDA housing.

Read also: SMSF & Single Contracts: Simplifying SDA Property Investment in 2025

Understanding the Financial Requirements for Investing in NDIS Properties with Your SMSF

If you’re considering investing in an NDIS property through your SMSF, you’ll need to be realistic about how much cash is required upfront. Unlike a standard property purchase, an SDA investment involves more than just a deposit.

At minimum, expect to need around 37% of the property’s purchase price in your SMSF. This accounts for the 20% deposit, bridging fees, prepaid interest, and other costs like stamp duty. For example, if the property is worth $1 million, you’ll need roughly $370,000 ready to go.

Here’s why the costs are higher:

• Third-Party Bridging Costs: Since SMSFs can’t directly borrow for construction, a third party acts as a proxy to manage the purchase and build. They incur holding and financing costs, which get passed on to you.
• Prepaid Interest: Up to 12 months of interest on the loan is typically paid upfront, ensuring smooth cash flow during construction.
• Stamp Duty and Fees: Legal fees, stamp duty, and additional settlement costs often add up to 4-5% of the property value.
  
  

Additionally, During the 12-18 month build period, property valuations can fluctuate, leading to shortfalls at settlement. it’s wise to keep extra funds for any post-construction expenses. This might include furnishing the property, managing initial vacancies, or engaging an SDA provider to help source tenants. Having at least $400,000 to $450,000 in your SMSF ensures you’re fully covered and avoids last-minute financial stress.

Why Market Conditions Matter for SMSF Property Investment

In recent years, land and construction costs have risen sharply, especially in popular metro areas. For example, building SDA properties in inner-ring suburbs has become significantly more expensive, with costs often exceeding $1 million. This has pushed many investors towards more affordable, middle-ring and regional areas where demand still outpaces supply.

On the demand side, data from the NDIS SDA Demand Report indicates ongoing shortages in well-located and purpose-built SDA properties, particularly apartments designed for single tenants. 

Areas such as New South Wales and Victoria show the highest levels of unmet demand, creating a clear opportunity for SMSF investors who can secure projects in these locations. Additionally, with interest rates stabilising and potential cuts anticipated in 2025, borrowing conditions are likely to improve.

Conclusion

Investing in NDIS property through your SMSF offers a chance to build long-term financial security while creating high-demand housing for SDA participants. It’s a practical solution for investors looking for reliable rental returns and portfolio diversification.

The upfront costs and third-party processes might seem overwhelming, but with the right preparation and professional guidance, SMSF property investment can be streamlined.

Speak to Us About Your SMSF Investment

We know the numbers, we understand the market, and we’ve helped other investors just like you.

To learn more, visit SMSF Investment Page or contact us today. Let’s discuss your goals, assess your options, and help you invest with confidence.

Your investment success starts with the right advice – let’s work on it together.