If you are currently doing your research and considering investing in DHA ( Defence Housing Australia) as an investment option,you should be aware of some very important considerations and they are:
- Price, are you paying too much for the privilege of securing a 9 or 12 year lease?
- Location, is there plenty of potential for Capital Gain?
- Is the property built to a standard that will appeal to the owner-occupier? (This is your biggest market and they are the ones who will pay most for a property on re-sale)
- Is the rent you will achieve fair market value and will increase according to vacancy rates and rental demand?
- Does the fact you will be eating into your cash-flow paying 16.5% management fees versus the standard 8% (In Queensland) concern you?
If you scroll down below you will find an article from the Investor Property Magazine confirming the pros and cons of investing in a DHA but for now.
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Below is an article from Your Investment Property Magazine regarding the Pro’s and Con’s of DHA (Defence Housing)
Defence Housing Australia’s property investment program is not for everyone and investors have varying opinions. Positive and negative stories circulate – but the key to knowing if an investment is the right one for you is to know what is actually involved in the product.
What are the pros?
One of the major draw cards that entices investors towards a DHA property is the concept of a ‘worry free investment’. A DHA property is a ‘passive investment’, meaning investors are buying into a long-term product that requires little management responsibility by the investor.
Tenancy, routine maintenance and day-to-day management of the property are taken care of as part of the DHA Property Care service. Also included is a lease-end restoration, which ensures that the property is returned in good order. This includes internal painting for properties leased for more than six years as well as carpeting and external painting for those leased for nine years or longer.
However, the major appeal with this investment type is the lack of vacancy risk. Regardless of whether your property is tenanted, DHA will cover your rent. So with vacancy being the leading concern for property investors those of a risk-adverse nature should look into this option.
What are the cons?
Unfortunately, all the extra ‘peace of mind’ that comes with a DHA property—guaranteed rent, long-term lease, property care and maintenance—also comes with a price. The management fee at 16.5 per cent is higher than that on a normal property which is around 8 per cent (but then you also have to factor in all the other costs that are covered by DHA as part of its management fee) and all homes are sold with a leaseback clause so this is not a short-term money spinner.
You can sell your property mid-lease, but your possible sellers are limited given the house must be sold with the lease intact. Although, it does seem that DHA has access to a number of prospective buyers looking to purchase mid-lease too.
Finally, geographically, you are limited to where you can buy a property. DHA investment properties are geographically diverse, near to Defence bases in all states and territories across the country. But if you have your heart set on a particular area then there is no guarantee that a DHA property will be available in that location.
Maybe it is for you, maybe it isn’t … that’s a decision that you as an investor must make for yourself. If you want a long-term, low risk, passive investment than DHA might be the way to go. If you prefer a short-term investment, with a lower management fee, you are happy to manage the maintenance yourself and you want to invest in a selected location, then DHA is probably not your best bet. As with any investment do your homework – and then the dividends will pay off.