Supported Independent Living Accommodation – why invest in them?
Prior Situation
SIL Homes : “It is blatantly obvious how when a government interferes with the natural order of things, that is when things go awry! … The results are disastrous, but have now actually presented an excellent investment opportunity for you.” If you are wanting to grow and secure improved wealth?
Why do I raise this?
Simple, a few years back when our government in Australia tried to slow down property price growth, implementing one control which was stopping banks lending to Investors – we wrote a blog based on the obvious logic of demand and supply stating that this will be Inflationary.
Fast forward s few years and it is blatantly evident that there is an incredible shortage of Rental Properties on the market, compounded by influx of immigration, downsizers and others splitting up their relationships and now each needing their own accommodations, then a new generation of young adults moving out of home, etc, etc .
Meaning demand continues to increase unabated, creating the need for hundreds of thousands of properties to be built across Australia, yet supply is so unable to meet demand in any shape or form. This continues to lead to a low and insufficient supply or rental accommodations Australia wide, with record breaking low vacancy rates. The result is higher rents, and higher rents is inflationary.
For investors, (sure interest rates have increased), yet where else can you invest your after tax dollars and earn a sound return on your investment, in what is deemed a low risk profile investment vehicle, especially when held for 7 to 10 years?
Higher rents are helping counter interest rate increases. So your money invested is still working not only smart for you, but also very hard for you. It is still very likely that your investment will be Cash Flow Positive, meaning more money in your pocket than the outgoings … whilst you pay less to your tax man, and hence more to your own financial future.
SIL Providers struggle to source Independent Living Options for their clients, and this is your Investment Opportunity.
Your investment opportunity
A very strong and emerging new rental sector are ‘care providers’ who are looking after people with disability, participants who do not want to, or cannot live at home. This strongly emerging disability market, is made up of want to be tenants, Carers who provide support services and these carers are just unable to compete with the wider Rental Market to secure housing to run their practice out of and accommodate their clients in.
Their major issue is your opportunity. Why?
- Historically low vacancy rates
- Dire Rental property shortages
- Builders unable to build accommodations to meet current demand
- Supply is unable to meet current and growing demand
- Rental yields are on the rise
- Carers are physically unable to secure houses to accommodate 2, 3 or 4 of their clients under one roof.
Rental Yields on your investment
How this works is : on your behalf, we will either secure an established suited property that is on the market, which will suit Carer’s requirements for their business and their clients who have the disability. Some works may be needed to bring the property up to date. We will only look in locations where carers have asked us to source homes which they can utilise for SIL purposes.
This further mitigates risk for you.
Or we will go to market, secure land for you where Carers are crying out for properties and build a new suited home on your behalf.
Either of the above is a fantastic investment opportunity for you and for the Carers too; whilst being a much needed solution for people with disabilities who do not qualify for SDA Homes.
We are of the view that as an investor, it is probable that your Net Yield could be around 7% per annum.
We base this on negotiating with the Carers, who enter into a Head Lease Agreement over your property, this agreement will be around 5 years and is renewable. It will also include CPI rental increases built into the agreement.
We will demonstrate to Carers how they can access certain funds out of their participants packages which will be utilised towards the rent you will receive. This is no way a Government Backed initiative like SDA or NDIS Properties are. This is an informal, quickly emerging strong new market opportunity for investors just like you.
Meaning a private agreement signed with the Carers who will enter into a Head Lease Agreement on your property, at a negotiated rental income. You will thus not pay management fees on the rental agreement as these are already included in the Rental Managements negotiations with the carers who are desperate to find suited Rental Properties, from which they can run their own business out of under one roof. Avoiding the need to geographically run around to different clients and also ensure that they are in control of the property for the period of the lease. No one is going to vacate them as their clients are finding out when renting privately in the open market, in accommodations that are not SIL accommodations.
Loans
Being classed as a normal house, just like the one next door, there are no SDA hoops you need to jump through and any bank (where you qualify financially) will lend for this investment.
In fact, we are of the opinion that it is easier to secure the loan because of the Head Lease which is deemed commercial in nature and higher than market rent anyway.
The home will cost the same as the house next door or the same as building a house and land package as there are only minor SIL requirements we opt to include to make the home more user friendly and tenant-able. Meaning your entry into the market is at a normal rate and you have potential for capital growth + being cash flow positive!
Why Invest?
For most, it is because it gives us improved control of our own financial destinies! Allowing us to live the lives we want and deserve for ourselves and our families
What makes for a Sound Investment Strategy?
- Ability to Leverage up into it
- Meaning, use someone else’s money where you invest say 10% or 20% and the bank invests the rest
- This results in only your 10% working at 100%
- Invest where other’s help you fund your Investments
- Tenants paying you rental income to help you fund your investment
- Tax man allowing deductions so you pay less tax and more towards your own investment strategy
- Invest in a strategy and risk profile which suits your purpose for the investment
- Invest to achieve Capital Growth plus be Cash Flow Positive
- This way, the banks will lend you more for your next one sooner.