- Quote:Originally posted by KJK51:
This resulted in an ungeared IRR of 9.02%; before tax geared IRR of 13% and after tax geared IRR of 16% at eh end of the 10 yr investment period. However at no time throughout the 10 year investment period did the property return +CF so the IRR was based solely on the capital growth aspects of the property!>>>>
Quite right…The DHA property I own will never turn in CF+ over 10 years by my calcs, with an Interest Only loan.
And with prices dropping over the last 18+ months in Sydney, the -ve gearing story is getting very hard to believe in.
JBAs an ex ADF member I am aware of DHA Housing. The attractiveness is that rent is paid for the agreed term irrespective of any vacancies during that period. ie the cash flow is guaranteed. If the property is leased to DHA for 9 years, the property is repainted and recarpeted at DHA expense before it is returned to the owner. But…I’ve always found that the upfront cost price was inflated to the point where I considered it expensive relative to the surrounding properties and the rental receipt was artifically high. This meant that if things were in a bit of a slump at the end of the agreed term, then a) the property would not have appreciated as much in real terms, and b) the rental receipts having been “inflated” for the term of the lease to DHA would come back down to earth to meet the market return. Thus whilst the property would have been a “cash cow” for the lease period, it would have to stack up on fundamentals at the finish line. The standards set by DHA would also leave no room to value add by doing a reno. The area that I live in has many DHA properties and I haven’t heard much, for or against the idea. I’ve just gone for properties that enable me to be a little more proactive, in terms of renos, standards and the ability to set my own rent based on the market and the standard I set. FYI
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