Rent to sell - NDIS Vs Rent-to-Sell: A Comprehensive Guide for Australian Real Estate Investors

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This guide provides an in-depth comparison of Rent-to-Sell and NDIS Investment Properties, helping you understand which option may align best with your investment goals. While NDIS has worked well in the past, how well is it working today? And what exactly is Rent-to-Sell? How does it provide 50% extra weekly cash flow plus a guaranteed future sale price (or higher)? We'll find out...

Take me straight to the Rent-to-Sell Calculator.

Introduction
Comparison Table
Understanding the Investment Models and Yields
Building Requirements
Build Times
Locations
Prices
Mortgage Options
Mortgage Serviceability
Leasing Structures
Property Management
Reselling & Capital Appreciation
Tax Benefits
Guarantees
Fees & Additional Costs
Rent to Sell Calculator
Conclusion
FAQs
References

1. Introduction

The Australian real estate market offers diverse investment opportunities, each with unique benefits and challenges. Two options that stand out are Rent-to-Sell Investment Properties and NDIS/SDA Investment Properties. This comprehensive guide aims to provide a clear comparison between these two models, enabling you to make an informed decision that aligns with your financial objectives.

2. Comparison Table

The table below provides a side-by-side comparison of key features between Rent-to-Sell and NDIS/SDA investment properties:

FEATURES	RENT-TO-SELL	NDIS/SDA
Property Prices	✅ $650k-$850k	❌ $1M+
Rent-to-Sell properties are priced for accessibility, while NDIS properties start at $1M due to specialized construction, with costs rising by 23%-57% for customization.
Cashflow/Yields	🔄 7-8% annual cash flow	🔄 6-14% gross yields
Rent-to-Sell provides 50% above standard market rental rates and includes tenancy guarantees. NDIS yields depend on occupancy, which may not be guaranteed.
Location & Demand	✅ Broad demand in QLD/NSW metro	❌ Limited to participants & services
Rent-to-Sell experiences high demand from creditworthy tenants in metro areas. NDIS demand depends on matching special needs participants and must be near services like therapy centers.
Building Requirements	✅ Standard builds for townhouses and houses up to $850k	❌ Highly specialized, limited options
Rent-to-Sell works with standard properties, subject to PublicSquare approval. NDIS properties require custom features like larger floor plans, robust materials, home automation, and additional bathrooms.
Build Times	✅ Standard 6-8 months	❌ Extended due to additional requirements
Rent-to-Sell follows standard timelines, while NDIS builds may take an additional 3+ months due to certification and customization processes.
Mortgage Options	✅ Flexible with any broker or lender	❌ Requires specialized lending
Rent-to-Sell investors can use standard financing, while NDIS properties often require niche loans with higher costs.
Mortgage Serviceability	🔄 Enhanced after first year	🔄 Depends on specialized lenders
Rent-to-Sell serviceability improves post-purchase. NDIS lenders assess serviceability based on participant occupancy.
Leasing Structures	✅ Single long-term lease (4-7 years)	❌ Multiple agreements with 24-month terms
Rent-to-Sell offers straightforward tenancy agreements, while NDIS requires coordination of multiple leases.
Property Management	✅ Standard management	❌ Specialized management
Rent-to-Sell uses standard management approaches. NDIS management requires specialized compliance.
Guarantees	✅ Tenancy guarantees	❌ No guarantees
Rent-to-Sell provides tenancy guarantees, while NDIS properties offer no such guarantees.

3. Understanding the Investment Models and Yields

Rent-to-Sell Investment Properties: Rent-to-Sell is an investment strategy where tenants rent a property with the option to purchase it after a set period, typically between 4-7 years.

Enhanced Cash Flow: Investors receive standard market rent plus an additional 50% of the first-year rental rate.
Guaranteed Future Sale Price: Assurance of a sale price that includes capital appreciation or market value, whichever is higher when sold.
Tax Benefits: Includes negative gearing, depreciation, and CGT discount.

NDIS/SDA Investment Properties: Designed for individuals with significant disabilities under the National Disability Insurance Scheme (NDIS).

High Potential Yields: Gross yields ranging from 8-14% for full occupancy.
Occupancy Dependency: Rental income is reliant on NDIS participants.
Social Impact: Provides specialized housing to high-needs tenants.

4. Building Requirements

Rent-to-Sell Properties: Suitable for standard construction or existing homes. Subject to approval, may include townhouses or house-and-land packages.

NDIS/SDA Properties: Requires specialized construction with custom features, including accessibility upgrades and home automation.

5. Locations

Rent-to-Sell Properties

Broad Demand: High demand throughout Queensland (QLD) and New South Wales (NSW), with Victoria (VIC) expected in early 2025. As Australia’s only provider of Rent-to-Sell homes, PublicSquare processes more than 2,000 tenant applications per month.
Location Flexibility: No special location requirements, allowing investment in both metro and regional areas with strong appreciation potential.

NDIS/SDA Properties

Strategic Placement Needed: Must be near essential services like medical facilities and therapy centers.
Limited Locations: Often confined to established metro areas due to participant needs.
Demand Analysis Required: Investors need to analyze demand-driven locations using specific tools.

6. Prices

Rent-to-Sell Properties

Affordable Entry Point: Starting around $650,000 for off-the-plan or existing 4-bedroom houses.
Standard Market Prices: Aligns with typical property prices, making financing more accessible.

NDIS/SDA Properties

Higher Initial Costs: Starting at around $1 million due to specialized construction.
Increased Investment: Costs estimated to be 23% more for apartments and up to 57% more for houses compared to standard properties.

7. Mortgage Options

Rent-to-Sell Properties

Standard mortgage options available for investors, typically requiring only basic lending criteria.

NDIS/SDA Properties

Mortgage options can be more complex due to the specialized nature of the properties and the need for tailored financing solutions.

8. Mortgage Serviceability

Rent-to-Sell Properties

Rent-to-Sell properties provide additional cash flow, helping investors meet mortgage serviceability requirements more easily.

NDIS/SDA Properties

Serviceability for NDIS properties can be more complex due to occupancy dependency, meaning rental income is not guaranteed.

9. Leasing Structures

Rent-to-Sell Properties

Tenancy agreements that last for 4-7 years, with the option for the tenant to purchase at any time during the lease period.

NDIS/SDA Properties

Leases typically cater to tenants with specific needs, often longer-term agreements with higher costs involved.

10. Property Management

Rent-to-Sell Properties

Managed like traditional rental properties with typical property management services.

NDIS/SDA Properties

Specialized property management services required to cater to NDIS participants’ needs.

11. Reselling & Capital Appreciation

Rent-to-Sell Properties

Guaranteed capital appreciation or market value at the time of sale, whichever is higher, providing significant upside potential.

NDIS/SDA Properties

Capital appreciation potential, though market conditions and tenant occupancy can affect outcomes.

12. Tax Benefits

Rent-to-Sell Properties

Negative Gearing: Available for investors, allowing interest on loans to be deducted from rental income.
Depreciation: Investors can claim depreciation on the property’s structure and assets.
Capital Gains Tax Discount: Available for long-term property investors holding properties for over 12 months.

NDIS/SDA Properties

Negative Gearing: Available for NDIS property investors, allowing them to offset losses.
Depreciation: NDIS properties may also offer depreciation benefits due to specialized equipment.
Special Tax Deductions: Available for investors in SDA properties due to the nature of the property.

13. Guarantees

Rent-to-Sell Properties

Guaranteed Tenancy placement and free tenant replacement if something goes wrong. Also guaranteed - Future sale price or market value upon sale (whichever is higher)

NDIS/SDA Properties

No government guarantees for occupancy, as income depends on NDIS participants.

14. Fees & Additional Costs

Rent-to-Sell Properties

No significant additional fees besides standard property management fee and transaction fees. Typically cheaper fees than traditional buy and hold investment model and much cheaper than NDIS.

NDIS/SDA Properties

Additional costs for specialized construction and compliance certifications.

14. Rent to Sell Calculator

Use this interactive calculator to estimate your potential returns with Rent-to-Sell properties:

Conclusion

Choosing between Rent-to-Sell and NDIS Investment Properties depends on your investment goals, risk tolerance, and desired level of involvement.

Rent-to-Sell Properties offer:

Enhanced Cash Flow: 50% extra cash flow.
Guaranteed Future Sale Price: Assurance of capital appreciation or market value upon sale (or market value if higher).
Simplified Management: Standard property management practices and single tenancy agreements.
Flexibility: Broad location options and standard mortgage products.
Lower Entry Costs: More accessible pricing makes it easier to enter the market starting at around $550,000.

NDIS/SDA Properties offer:

Potential High Yields: Attractive gross yields for full occupancy.
Social Impact: Contributing to housing solutions for individuals with disabilities.
Specialized Investment: Unique property features catering to a specific market segment.
Higher Entry Costs: Requires a significant initial investment, usually starting at $1 million.

FAQs

How does Rent-to-Sell provide 50% extra cash flow?
Rent-to-Sell properties offer an additional 50% cash flow on top of the standard market rent, enhancing the investor's cash flow during the initial period. This extra 50% accumulates into the tenant’s deposit funding, which the tenant can use later when they purchase the home from the investors.
Is the future sale price guaranteed in Rent-to-Sell agreements?
Yes, investors are assured of a sale price that includes guaranteed capital appreciation or market value at the time of sale, whichever is higher, as assessed by an independent valuer, providing significant downside protection.
What happens if the tenant doesn't exercise the purchase option?
If the tenant does not exercise the purchase option within the lease term under a default, standard tenancy laws apply, and the property is returned to the investor, who may then choose to sell, or re-let with a traditional tenant or rent to buy tenant. If after 3 years, the tenant cannot get a mortgage to buy the home, they can request a sale of the property in the open market with no additional cost to the investor, and the investor shall receive the exact same returns they are entitled to whether its the tenant buying the home or an independent third party.
How is Rent-to-Sell different from traditional property investment?
Rent-to-Sell offers an additional cash flow benefit (50% extra on top of rent) and a guaranteed sale price, whereas traditional property investments focus solely receive the rental income, without the promise of an eventual sale at a predetermined price.
What is the minimum investment required for Rent-to-Sell properties?
Rent to Sell works with just about any property in QLD or NSW up to a starting value of $850,000. Therefore the minimum investment required depends on the market. In QLD it's still possible to buy some 4 bedroom homes starting at around $550,000.
Can Rent-to-Sell properties be sold before the tenant buys the property?
Yes, the investor has the right to sell the property at any time before the tenant exercises the purchase option. However, the contract terms with the tenant will need to be honoured by the new owner.
Are there any tax benefits for Rent-to-Sell investments?
Yes, investors in Rent-to-Sell properties can benefit from negative gearing, depreciation deductions, and capital gains tax (CGT) discounts, making it a tax-effective investment strategy.
How long does the Rent-to-Sell lease typically last?
The lease term typically lasts between 5 to 6 years with a maximum investment horizon of 8 years allowing the tenants time to build up their deposit and complete their purchase.
Can Rent-to-Sell investments be part of a self-managed super fund (SMSF)?
Yes, Rent-to-Sell properties can potentially be included in a self-managed super fund, provided the investment meets the criteria for SMSF investments.

References

Written by Jarrod Wills
Product Expert, PublicSquare

See more articles by Jarrod

About me: 5 years experience in the mortgage and lending space before joining PublicSquare in 2021. Passionate about providing excellent customer service.