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Defence Housing Investment

Defence Housing Investment 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. 

wirra way axon property

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?

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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.

defence-housing-investment

Location

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.

Capital Growth 

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.

Management Fee

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. 

Pros and cons of defence housing

Pros Cons
  • Long-term leases (anywhere between three to 12 years, depending on the type of property), which generally means long-term tenants.
  • Reliable rental income. Rent is paid monthly to the investor in advance. It’s also paid if the property isn’t occupied during the lease term.
  • Property management is mostly taken care of through a DHA care service. For a flat fee of 16.5% (deducted from the rent and 13% if a body corporate is involved) you don’t have to find new tenants; you don’t have to carry out property inspections (you will receive inspection reports); and if the home is unoccupied DHA will maintain the gardens and lawns.
  • DHA will cover the cost of most non-structural repairs.
  • Independent evaluations are undertaken each year by a licensed valuer with a recommendation to increase, decrease or maintain the level of rent.
  • The property management fee is about twice what you would pay a regular property manager (anywhere between 4% and 10%).
  • DHA properties are always sold at market value. The price is fixed and non-negotiable, meaning you’re not necessarily going to get the maximum value if you sell mid-lease. And you can’t negotiate lower when you buy.
  • Long-term leases (and tenants) can be a hindrance if you need to sell mid-lease. It can also limit possible buyers.
  • Properties are usually limited to certain locations that are closer to defence bases.
  • Lease agreements include a variable extension period, which is used at DHA’s discretion and can add another three years to the lease.
  • You will be responsible for outgoing costs such as council and water rates (usage reimbursed), strata rates, land tax, insurance, termite inspections and some repairs and maintenance.

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.

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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 hundreds of million dollars back into the Defence Community. 

Our team of Veterans have 90+ years of service. We also have over 110 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. Learn more about Axon Property Group.

Free ADF Property Training

How to Be a Property Owner With Your Adf Housing Entitlements: DHOAS, HPAS & HPSEA

In this FREE training you are going to find out:
  •  What are your Defence Housing Entitlements
  •  How to buy property using your entitlements
  •  The best locations for capital growth and rent returns
  •  The secret to creating a sustainable property portfolio
  •  How to secure your financial freedom
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Frequently Asked Questions

Defence Housing Australia (DHA) is a government agency that provides housing for Australian Defence Force (ADF) members. It offers residential property investments where properties are leased back to DHA, ensuring guaranteed rental income and professional property management.

Investing in DHA properties involves purchasing a property at market price and leasing it back to DHA. DHA handles tenant placement, maintenance, and rent payments, providing a consistent and reliable income stream for investors.

Benefits include guaranteed rent, professional management, reduced tenant risk, and property maintenance by DHA. Properties are also refurbished at the end of the lease, ensuring they remain in good condition.

Drawbacks include high management fees (up to 16.5%), lack of investment flexibility, and restrictions on selling the property to only other investors during the lease term.

Lease terms for DHA properties typically range from 9 to 12 years. During this period, the property is managed and maintained by DHA, providing long-term investment stability.

Once the lease expires, investors gain full control of the property. They can choose to move in, rent it privately, sell it, or redevelop the property as they see fit.

DHA properties are generally considered higher-yield investments rather than capital growth investments. They are located near military facilities, which may not align with typical capital growth drivers like economic conditions and population growth.

DHA charges a management fee of up to 16.5% of the rental income. This fee covers property management services, including tenant placement, maintenance, and repairs.

Yes, but you can only sell to another investor who agrees to continue the lease with DHA. This limitation can affect the property’s marketability and resale value during the lease period.

DHA conducts regular maintenance and repairs throughout the lease term. At the end of the lease, DHA refurbishes the property, including repainting and re-carpeting, to ensure it remains in good condition for future use.