ROLLING THE DICE – advice needed please.

Gday Parra boy, just touching base to see if you are in the Military?

If not I can give you a bit of an insight into how DHA think.

Cheers

DHA in smaller cities are pretty good for capital growth. However in the bigger cities DHA houses are futher out from the CBD in less desirable areas as the rent Military members pay to rent them is accross the board. So therefore if a Military member is renting a house in Windsor in Western Sydney is the same as what they would pay renting a DHA apartment on Sydney Harbour. Therefore DHA pay more rent to you as opposed to balancing it with the Military members contribution.

I think your properties have done pretty well considering the GFC however not as well as properties in the southern states.

The problem I see with DHA is there isn’t much flexibility with rent and you have to sell it with a lease. They also charge 16,5% management fees and as DHA tenant who also has a property portfolio I would be disgusted if my agents managed my houses as DHA do. DHA’s properties as far as I am concerned are a little over priced and there isn’t room for negotiation. If you take into consideration the price, management fees, and the rent which is never the top you could get if it were rented on the normal market return wise they are about even. Adding to this that not many properties in the southern states are in high growth areas. DHA houses have to more or less be brand new which pushes the areas they can be further and further out as there are limited new houses in the city and there specs are as you mentioned very specific. Which inner city houses do not normally have.

Property is a long term asset so if you do sell Medowie you may be robbing Peter to pay Paul. Why don’t you mix it up and try a mining area or a high growth capital city location? Diversity can be the key.

I think you need to review your long term plan. DHA are a very non agressive sort of investment. If you are happy for them to slowly grow and have a good nest egg in 20 years time great but if you are looking for shorter term goals I would be looking at something else.

Which reminds me I need to contact DHA about the leak in the wall they said they were going to fix a month ago

Hi Parraboy

Welcome to the forum.

I agree with Terry, those numbers aren’t overly spectacular. Do you suspect that the Medowie property has growth potential? Is there anything to suggest that the area will increase in value? Is there something that you can do cosmetically to the property to improve its value?

I’m generally a buy and hold type of guy – but that property just doesn’t seem to be doing a lot.

Cheers

Jamie

Hi Parraboy,

Take it from someone who's been there and done that.  I've had to swallow a bullet once – a rather large one.  But as the Chinese proverbs says, "Take one step back and two forward."

What I learned from selling a non-performing asset is this:  I got to fight another day.  If you carry Medowie for too long and too far into your journey, it will likely bog you down.  Unless as Jamie said you suspect Medowie has growth potential.

Take care.

Angel

Parraboy one quick way to do a bit of benchmarking is to compare your houses with houses in the area you have bought, use the free ABS, Residex data for houses and compare growth with these numbers to your individual properties. If you aren't adding value to your houses then that's really all you can achieve, you check your areas are performing well, and if they aren't is there some reason there might be some mean reversion or improvement in the future.

ABS quarterly data
Residex Data

DHA properties are neither good or bad, just deals that need to be weighed on their own merits. In the last twelve months we have purchased some DHA properties on behalf of long term investor clients. It's not unusual that I see some very poor results for previous DHA investors as they simply paid too much at the time, what might have been perceived as low risk (guaranteed rent and new carpets!) was anything but for these buyers.

Also there is the issue of location, to me location trumps most other considerations, so the hierachy of investment decisions should be 1) location and budget 2)Best property to suit (Is there a DHA property here?) rather than.. 1) I will buy a DHA property 2) Hmm where are they and what can I afford?

It's my experience that the threat of vacancy and bad tenants is sometimes given too much weight by investors and this is perhaps one factor in why DHA properties can attract a premium price. Hedge your risk with good insurance, property management and good buying and you have no need for rental guarantees or any other hand holding.