Pro: Independent evaluations   

To keep aligned with the terms of your lease, DHA will conduct independent rent reviews annually by a licensed valuer. They will provide ongoing recommendations on whether you should increase, decrease or maintain the level of rent. 

Pro: Guaranteed rent 

You sign an agreement with DHA as your tenant. This means you’ll receive guaranteed rental income for the term of the lease and no vacancy risk – even if the property is without a tenant, the government will cover you. Considering most DHA properties on offer are built new, it ensures the age of the average housing inventory is relatively low.

Pro: Never face the risk of no tenants

The lease terms are also much longer with DHA – ranging from 3-6 years or 9-12 years. For comparison, typical investment properties usually experience an average of at least 1-2 weeks vacancy a year, with the national rate currently held at 1.6%. 

Pro: Ensure you pick a premium home 

The common misconception is that DHA properties are in non-so-desirable locations, thus limiting capital gains potential in the future. This is not true – with The Australian Financial Review highlighting that DHA has managed properties in capital cities AND award-winning developments. 

Pro: They will manage everything for you

This is great for “buy and forget” attitudes in the investment game. When you purchase an investment property from DHA, you lease it back to them. A huge attraction is the idea of NO management responsibilities. They will even refurbish the property when tenants move on – an appealing offer for risk-averse people. 

It’s not necessarily a deal-breaker, but the locations of DHA properties are usually restricted to military bases within 30km to provide homes for ADF members and their families. So if you have your heart set on a particular area, there’s no guarantee that properties will be available in your desired location. 

Note: This often means they could be located in regional areas rather than high growth capital cities. If you pick in a low-growth or declining area, you could limit the potential capital appreciation in that location when it comes time to sell. 

Con: There are some extra costs involved 

DHA will deduct a 16.5% service fee on the rental income per annum (13% for townhouses and units) for managing and maintaining your property. This compares to the average 4-10% annual fee charges under typical property management – more than double. 

If not planned and budgeted for correctly, all your investment profits could go down the drain, and as with any fees, the fees could significantly reduce your return. 

As the homeowner, 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.

Con: Limited appeal JUST to investors 

Since the scheme is based on sale and leaseback, DHA will restrict the sale of properties if a rental agreement is still in place, meaning it eliminates owner-occupiers as buyers. In short, your only potential buyers will be investors who think DHA properties are a good bet since owner-occupiers comprise around 70% of the real estate market in Australia, the leaseback agreement attached to the scheme rules out that entire segment. 

Con: What you see is what you get

DHA properties are always sold at market value. The price is fixed and non-negotiable, meaning you may not see the maximum value if you sell mid-lease; you also can’t negotiate lower when you buy.  

Download the Pros & Cons of Defence Housing here.