Hi everyone
A number of years ago, when working as a lending officer in a bank, a couple of my clients purchased investment properties on a 10 year rental arrangement with the Defence Force.
Having done some limited reaseach at the time, it was indicated to me that the purchase prices of the properties were inflated because of the rental guarantee.
Has anyone had any experience in this form of property investment and been able to pick up +cf deals?
Thanks,
DragonI have a lot of experience with them both as a broker and as an ex Army Officer.
I don’t think they are too inflated in the purchase price although I believe that the 6 or 9 yr guaranteed rental attracts a premium management fee. They maintain them to a high standard and repaint at the end of the lease. If you have a 9 year lease they recarpet as well.
Let me know if I can answer any specific questions. The term to search under is DHA.
Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
HI Dragon,
My parents invested in a Defence home a few months ago and you’re right, prices do seem inflated, its definitely NOT postitive cashflow and they are puttin in a significant amount extra to cover the loan costs each month. Plus there are management fees which is i think about $1500 per year (not 100% sure). But good thing is its gaurenteed rent for 9 years for them so hopefully at the end of it the capital growth would cover the losses they’ve made during the 9 years.
Hope this helps in any way.
Kim
We were keen on buying one a while back but the return just wasn’t there. It was more a 1:1 and we look for a 2:1 return i.e. purchase price was, say $250K, and rent was only $250 per week. Rent is guaranteed but the management fees are far higher than normal. I guess if you want an investment that is free of worry, they’re a good buy.
Hi
I live in an area where the defence home phenomina has been around for a while now.
What has been pointed out to me is what happens after the 9 years or time frame … when these homes may hit the market. Either as private rental options or as sales.
In a regional area here it had a real impact on the market, my own family home dropped over 25 % in value to soak up the no. of DHA homes on market.
In smaller communities your capital return could well be at risk.
One other thing is the “defence of the North” changes in policy. What is going to be based where ?? A squadron of this and that will now be based at XXX. So what happened to the maket where they came from??Thank you everyone for your responses.
Hi,
I’ve looked at them at various times and found that they would be negatively geared on the basis of an 80% lend.
They are properties that would be better suited for investors seeking capital gains returns and not wanting the usual hassles of tenants.
For cashflow investors, the deposit required to make them +ve cashflow would mean that the CoCR would be too low.
Merry Xmas,
Steve McKnight
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Thanks Steve
My Dad was encouraging me to look into them with more depth, but I think there would be other properties better suited.
Merry X Mas
Ron
What about display home from builders, they offer 6% return.
Anyone had dealings with these?
I am very familiar with DHA houses as an ex military member and from having one in the early 90’s before the boom took off in QLD. They are definately a -ve cashflow investment and the management fees have just gone to 16.5% on a brand new home!!! Have you passed out yet? You do pay an inflated price for the properties because of the guaranteed rent and I had a friend who only got just below market rent for her property for years from them and could not get a rent rise. Also when the glut of them comes on the market at the end of the 9 year lease its very hard to sell and you cannot break the lease and move into it yourself at any time, if you need to sell it must be as an investment property. I’d look elsewhere for putting your dollars to work. HG
Guys, yes I agree that they are negative cashflow, and wouldn’t touch them – except maybe as a resale from a owner rather than from DHA.
BUT, when you say the management fee is 16.5%, that covers all maintenance as well – so really, it’s not thaaaaat bad.
Cheers
MelThey can be a great investment for someone who truly wants a hands free neg geared property.
One issue is that you cannot break the lease with DHA. So if you sell you have to sell to another investor. I have been told by an investor that this means a $20K price reduction in his eyes.
Remember investors buy with a calculator and families buy with their hearts – who would you rather negotiate with?
Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi All
I too have had a look at the defense housing situation and found that for a negative gearded property it would be good, and if only you would like to own 1 property.
If you had to contribute $50-100 dollars a week of your own money how many of these could you afford.Food for thought
i moved out of a DHA house and into my own home[:X] back in July. The DHA house was great, old Queenslander next to Townsville’s prized [
] Ross River. The DHA staff up here are great [][]they sell their properties at the end of the leases through numerous local RE Agents. I tried to put an offer on the one i was living in but couldnt produce any results[].
One option with DHA is to build a house for them. they are frequently after properties especially up here. As everyone says yeild is poor but if you did it right you could get better returns than most would expect (buying undervalued, working the system, etc. []). i looked at some ex DHA houses around TSV (vincent and surounding suburbs)for $145k in July, they are now asking for $160k[8D]. + they also do units etc.
little secret, Tsv defence force is set to continue growing for a long time.if interested try http://www.dha.gov.au
if anyone wants email me and ill see if i can find the phone numbers or help in some way. [^]
Adrian [email protected]Adrian Cahill | AdrianCahill.com Personal Development Expert
http://adriancahill.com/from-investor-to-coach/
Email Me | Phone MeHere since 2002, however things have evolved over the years.
Im a former member of defence who has leased home to defence and had some exposure to what your talking about. Yes your absolutely correct…anything from 10 – 20% from my experience.
Jack
] Ross River. The DHA staff up here are great [
][
]they sell their properties at the end of the leases through numerous local RE Agents. I tried to put an offer on the one i was living in but couldnt produce any results[
].
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