19 February 2017 Investing in Defence Housing: The top 4 myths busted

Buying property remains a popular strategy for investors and traditional real estate is undoubtedly the most common strategy. However, there are other property investment options that many investors shy away from, mainly due to misinformation or lack of knowledge.

Investing in Defence Housing is quite a different strategy to typical real estate investing. DHA offers long-term leases, a guaranteed rent that is paid regardless of whether the property is occupied (and that will never fall below the initial agreed amount), and the peace of mind offered by DHA Property Care—a day-to-day property management and maintenance service that eliminates the usual hassles of owning an investment property.

It is precisely these unique features that cause the most confusion for investors, and cause them to overlook the benefits the DHA model offers investors.

Let’s explain the top four misunderstandings.

1. You can’t sell your property during the lease.

A DHA property can, in fact, be sold at any time during the lease. However, there are some special conditions involved in the sale of a DHA property. The main one being that the lease must remain in place with the new owner. In other words, the purchaser must understand the agreement with DHA continues despite the ownership of the property changing hands. At the end of the lease, the owner can then rent privately, move into or sell the property, as they wish.  

There are also some limitations around inspections and the process of the sale which are designed to protect the privacy of the tenant.

2. Rents are set below market value.

Rents are initially set to market value, and DHA guarantee that the rental rate will never drop below the starting rent amount, even if the market drops1. An independent rent valuation is then undertaken annually to ensure owners are receiving market rent, so investors can take advantage of any rent increases in their area.

DHA also guarantee to pay the rent, regardless of whether there is a tenant or not2. This means no loss of income due to vacancy—a real plus for property investors, who can then rely on receiving that rental income to contribute to their own cash flow and financial planning.

3. DHA properties are in undesirable locations.

DHA tenants—members of the Australian Defence Force—have the same needs as the rest of us and want to live close to amenities like schools and shops, and have access to transport options. As such, DHA properties are located within communities around Australia, in major capital cities and regional centres where the Defence Force has a presence. DHA does not sell properties on Defence bases, but rather in locations that support Defence members and their families to become a part of their community.

4. The management fee is too high.

DHA’s service fee (16.5% for freestanding houses, 13% for properties with a body corporate) comes with a range of benefits that are commonly overlooked, or not compared adequately with the real costs of holding a traditional real estate investment. The service fee includes DHA Property Care—a huge range of services that make owning a DHA property much simpler than a traditional residential investment. All the day-to-day aspects of managing your investment are taken care of, including coordinating and paying for most non-structural repairs and maintenance. Plus, once the lease ends, DHA will restore the property, which may even include fresh paint and new carpets.

BIS Shrapnel published a report comparing DHA’s service fee with the cost of traditional residential investment. It found that DHA investors could be paying around 15% less than those with traditional property investments, who also risk losing income due to vacancies—something DHA owners are guaranteed against.

As always, any investment strategy depends upon circumstances of the individual investor. But for those who are looking for a guaranteed income based on annual rental appraisals, and set fees that include hassle-free maintenance, then perhaps a DHA property investment is worth a look.

Register your interest and start your investment journey with DHA.

Investment is subject to DHA's lease terms and conditions of sale. Investors retain some responsibilities and risks, including property market fluctuations. Prospective investors should seek independent advice. 1. Rental floor applies to DHA properties leased under DHA’s Lease Edition 6C, which will not cover all DHA properties. 2. Rent may be subject to abatement in limited circumstances.