Home SMSFs NDIS property investing through an SMSF: Tips and traps

NDIS property investing through an SMSF: Tips and traps

What you need to know about investing in NDIS housing through your SMSF, including the benefits and potential pitfalls.

First published on 11 Sep 2023

NDIS property investing through an SMSF: Tips and traps

NDIS Property - also known as Specialist Disability Accommodation (SDA) - is a disability housing initiative of the federal government which has grown in popularity for SMSFs due to high rental returns and long-term contracts providing income stability for SMSFs.

With close to $15 billion in government funding for the SDA scheme expected by 2025 and around 4.3 million Australians needing disability housing, NDIS property investing, coupled with high rental yields of 10% plus for SMSF investors, is a sought-after investment.

Lending for NDIS Properties in an SMSF

An SMSF allows members to invest in a range of assets including property under the super laws. When it comes to NDIS properties, there are specific lending considerations for SMSF members.

LVR (Loan-to-Value Ratio)

Typically, banks and lenders may require a lower loan-to-value ratio (LVR) for NDIS properties within an SMSF, which means you will need more savings for a deposit in your SMSF.

Interest Rates

Interest rates for loans on NDIS properties can vary depending on the lender, the location of the property and the specialised nature of NDIS property.

Loan Duration

The loan duration can vary from 15 years to 30 years, but it's crucial to align it with the retirement strategy of the SMSF members.

Repayment Flexibility

Given the steady cash flow from NDIS property rentals, some lenders might offer more flexible repayment terms.

Loan Security

Generally, the NDIS property itself can serve as collateral, though lenders might have varied criteria on this front.

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Looking to take control of your retirement? This table below features SMSF loans with some of the most competitive interest rates on the market.

Loan purpose

Loan amount

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Lender	Home Loan	Interest Rate	Comparison Rate*	Monthly Repayment	Repayment type	Rate Type	Ongoing Fees	Upfront Fees	Max LVR	Features	Link	Compare	Promoted Product	Disclosure
loans.com.au	loans.com.au Variable SMSF Loan P&I <70%	6.99% p.a.	7.01% p.a.	$3,323	Principal & Interest	Variable	$null	$230	70%	Minimum 30% deposit needed to qualify Available for purchase or refinance No application, ongoing monthly or annual fees. Dedicated loan specialist throughout the loan application	More details	Compare	Promoted	Disclosure
WLTH	WLTH Ocean SMSF 60 P&I ($50k - $2m)	7.19% p.a.	7.74% p.a.	$3,391	Principal & Interest	Variable	$395	$null	60%	Offset facility EASY Refinance with minimal documentation Residential & Commercial Australia’s first certified Impact Lender	More details	Compare
Firstmac	Firstmac SMSF 70	7.24% p.a.	7.26% p.a.	$3,407	Principal & Interest	Variable	$0	$221	70%		More details	Compare		Disclosure
Liberty Financial	Liberty Financial Residential SMSF (LVR <80%)	7.25% p.a.	7.65% p.a.	$3,411	Principal & Interest	Variable	$30	$825	80%		More details	Compare
Firstmac	Firstmac SMSF 80	7.74% p.a.	7.76% p.a.	$3,579	Principal & Interest	Variable	$0	$221	80%		More details	Compare		Disclosure
La Trobe Financial	La Trobe Financial SMSF Residential	7.75% p.a.	7.83% p.a.	$3,582	Principal & Interest	Variable	$0	$995	80%		More details	Compare
loans.com.au	loans.com.au Variable SMSF Loan P&I <80%	7.49% p.a.	7.51% p.a.	$3,493	Principal & Interest	Variable	$0	$230	80%	Minimum 20% deposit needed to qualify Available for purchase or refinance No application, ongoing monthly or annual fees. Dedicated SMSF loan specialist throughout the loan application	More details	Compare	Promoted	Disclosure

Variable SMSF Loan P&I <70%

Product Features

Minimum 30% deposit needed to qualify
Available for purchase or refinance
No application, ongoing monthly or annual fees.
Dedicated loan specialist throughout the loan application

Monthly repayments: $2,659

6.99% Advertised Rate (p.a.)

7.01% Comparison Rate*

More details

Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of . View disclaimer.

Important Information and Comparison Rate Warning

Benefits of Investing in NDIS Property through an SMSF

Stable Returns

Given the government-backed nature of the NDIS scheme, there is a potential for steady rental returns of 10-15% for up to 20 years on these properties.

Long-term Agreements

Many NDIS properties come with long-term rental agreements, which can provide SMSF trustees with consistent and long-term income.

Diversification

A NDIS property can be an excellent addition to diversify an SMSF's investment portfolio.

Tax Incentives

SMSFs can benefit from tax concessions on rental income and capital gains, provided certain conditions are met.

Risks of Investing in NDIS Property through an SMSF

Regulatory Changes

As with any government-backed scheme, there's the risk of regulatory changes which can impact the value and rental yield of the property.

Market Saturation

As more investors dive into the NDIS property market, there might be an oversupply, potentially impacting rental returns.

Maintenance Costs

NDIS properties may require specific modifications or upgrades, leading to potentially higher maintenance costs, which is one detracting point.

Liquidity Concerns

Real estate is a relatively illiquid asset. If the SMSF needs to access funds quickly, selling an NDIS property might take some time.

NDIS Risks

1. NDIS Compliance: The property must adhere to NDIS standards. Any deviation can jeopardize the rental income, as non-compliance can result in the property being unsuitable for NDIS participants.

2. Property Vacancy: While there's a significant demand for NDIS-compliant housing, any extended vacancy can impact returns.

3. Changing Regulatory Landscape: As the NDIS evolves, there might be changes to the rules and regulations governing these investments.

Summary

Investing in a NDIS property through an SMSF may be lucrative for some SMSF members seeking long-term, stable returns in retirement. All investing is risky, so, it's essential to weigh up the benefits against the potential risks by seeking financial advice.

Disclaimer: This article is meant for informational purposes only and does not serve as financial advice. Always consult with a financial professional before making any investment decisions.

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Rob Joseph

Rob Joseph is the founder and director of MySMSF. With over a decade as a Financial Adviser and an SMSF Administrator since 2009, Rob's mission is to empower Australians to captain their retirement savings through an SMSF.

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Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you.

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NDIS property investing through an SMSF: Tips and traps