a closer look at
DEFENCE HOUSING australia
Defence Housing Australia
Investing in a Defence Housing Australia (DHA) property can seem like an attractive prospect – at first glance.
How does it work?
Defence housing is a residential property investment offered by Defence Housing Australia (DHA), the federal government service that provides homes to members of the Australian Defence Force.
Defence Housing Australia (DHA) has thousands of properties in different locations. As an investor, you have the opportunity to buy real estate at market prices, which are then leased back to DHA.
DHA arranges tenants, maintenance, repairs and rent increases. The property is also refurbished when the tenants move out. One of the main selling points of DHA properties is the guaranteed income, as the government pays the rent even if the property is vacant.
A long-term lease, reliable tenants, a consistent income, and a property that is fully repainted and recarpeted at the conclusion of the agreement… It sounds like a dream investment – doesn’t it?
Is INVESTING IN DHA the right choice for you?
We agree that investing in DHA seems like an attractive proposition. But here’s why it may NOT be the right choice for you.
Lack of Flexibility
The main thing you have to consider if you are thinking about investing in DHA, is that in truth, your investment is inflexible. Once the lease expires, as the investor you gain full control of ownership – you can move in, rent the property privately, knock it down, or do whatever you wish with the property. However, for the duration of your investment, that property is 100 per cent locked in with DHA.
No matter how your circumstances change or what you would like to do with the property, your hands are tied, as you are locked into an iron-clad rental agreement that can last up to 12 years.
What’s more, if you want to sell your property during that time, you will also be forced to sell to another investor, rather than an owner-occupier.
DHA properties are, understandably enough, built-in areas suitable for Defence members and their families, which are near military facilities. The DHA, therefore, doesn’t necessarily considers the property from an investment perspective – which means capital growth drivers, economic conditions and population growth prospects.
Defence housing is seen as more of a higher-yield strategy while regular residential property investments are aligned with capital growth. It is important to Make sure your property has a multi-faceted demand, both from a rental perspective and from a resale point of view. Choosing the location and choosing the type of property that’s going to meet that brief is really important.
Make sure you also understand the true cost of the investment. This is particularly the case when you weigh up the defence housing management fee (16.5%), but also the opportunity costs you may be forgoing by focusing on a yield.
Font: Money Magazine Australia
Summing it up
Investing in DHA can be considered a “safe” investment with little legwork and a long-term guaranteed income. However, given the high management fees, the lack of strategy behind the location and the inflexibility of the investment, we strongly believe that investors can find far better deals, with much lower risk.
If you’re an ADF member, there are a number of benefits and ADF housing entitlements that you can take advantage of, including subsidies and grants and entitlements. These range from assistance on mortgage repayments to lump-sum payments you can receive for the purpose of purchasing a home. With this assistance supporting your purchase, you can get a head start on your investment fast track your investment plan.
If you’re not an ADF Member, there are many other options available that can help you get started. Axon can point you in the right direction and help you develop a financing strategy that works for you.
how can axon help you
We are a Veteran-owned and operated business, working to empower the Defence Community to secure their financial future through property, by helping them to understand their unique housing entitlements.
We provide education, coaching and mentoring throughout the entire property acquisition process, from strategy and finance through project management of the build. So far, we have helped hundreds of families build properties, injecting more than $150 million dollars back into the Defence Community.
Of our 10 Veterans in the business, we have a combined 116+ years of service. We also have over 80 years of property experience.
I’m sure you’d agree, this makes Axon Australia’s most elite property coaching business that specialises in helping the ADF Community. We know your unique ADF circumstances. We know how to help you.