The Australian’s Money Cafe: Investors warned of misleading promotions for NDIS properties

Property developers are promising strong and stable returns from NDIS investments – but the risks are bigger than you might think.

NDIS Minister Bill Shorten. Picture: NCA NewsWire / Ben Symons

Private investors have been warned that widely advertised returns from NDIS properties may be misleading and most likely are too good to be true.

Property developers aiming to exploit the scheme are promising investors income returns up to four times higher than mainstream property yields, but advisers warn such returns are only available in roughly one quarter of the NDIS-approved developments.

“There are no guarantees that if you buy one of these properties then you are going to pick up government payments. The way it works, the tenants decide for themselves where they want to go.

“In order to get the sort of income returns at up to 20 per cent a year some promoters are promising, an investor has to have a tenant under the scheme with “high needs”. But only one in four NDIS tenants fall into this category,” says financial adviser James Gerrard in this week’s episode of The Australian’s Money Cafe podcast.

Although the Albanese government is spending $700m a year on disability accommodation and investors expect predictable returns from NDIS projects, advisers warn that rental income is unpredictable and such properties may be difficult to sell.

Some promoters are even splitting up properties and creating “fractions” where everyday investors can invest amounts that are much lower than the usual entry point in the property market: $50,000 minimums are not unusual.

Developers are also selling NDIS-linked investments as “underwritten by the federal government”, but advisers say the Australian Securities and Investments Commission have already expressed concern to adviser networks over aggressive marketing in this area.

Gerrard says there are already fears of oversupply in NDIS properties with 15 per cent vacancy rates compared to less than 5 per cent in general residential property.

A listener question on property investment brought the NDIS issues to light in this week’s podcast.

Questions always welcome to [e-mail]

In this week’s episode we cover

• The new plan to reform financial advice

• What every investors needs to know about NDIS property

• Why interest rate increases don‘t work like the used to do

• ETFs versus managed funds

Wealth editor James Kirby’s guest this week on The Australian’s Money Cafe podcast is financial adviser James Gerrard, who has also written a feature on the NDIS issue for this weekend’s Wealth section in The Australian.