tHE pros & cons of dha


Is Defence Housing investing right for you?

ADF Housing Investment Property: Success Story

Knowing if Defence Housing Australia is a suitable investment for you is understanding what is actually involved. The key to knowing if Defence Housing Australia is the right investment for you is to know what is actually involved.

What are Australian Defence Housing Investments?

Defence Housing Australia (DHA) is a federal government-backed scheme that has been self-funded since 1988 and continues to generate revenues of more than $1 billion per annum.

DHA’s goal is to provide housing to members of the ADF and their families. That’s why DHA typically sells and leases housing within 30km of military bases. These properties are not aimed at owner-occupiers as the properties come with long leases with assured rentals. 

Defence Housing Australia 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.  

FACT: As at July 28, there were 12,600 homes owned by private investors and about 3,700 owned by DHA.

What's the process of DHA?

The process involves DHA building or acquiring property and then selling it to an investor at market value. The investor then leases the property back to DHA for between nine and 12 years, with options for extension while being paid market rent. You’ll need to register with DHA and obtain finance pre-approval, so you can get to select properties released for sale.


Properties with a DHA lease in place have become exceedingly popular, so much, so that prospective buyers are required to go through a ballot system just to secure a property. Once you’ve completed the first steps, such as obtaining finance and selecting a DHA property – your consultant will enter you into the fortnightly ballot. 


If you have been successful in the ballot, the DHA property will be placed on hold for seven days. A small number of those properties are occasionally made available to buy outside of the ballot system. They’re marked as ‘buy now’ and are available for immediate purchase. This creates a fair system so that anyone interested in a DHA property has an equal opportunity to do so.


The general requirements for DHA to consider properties are that they must be within close proximity to a military base (within 30km or less) with a minimum of two bedrooms with built-in wardrobes. 

Like any investment, there are pros and cons to the scheme.
So we're here to break down DHA for you!


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. 


Con: You are geographically limited to where you can buy   

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.

Pros & Cons of DHA


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. 

Depending on your personal and financial circumstances, there is a range of options available for you to choose from. As an ADF member, several benefits, entitlements, subsidies, and grants are available. 

The answer to whether DHA is a suitable investment will depend on you. Before you decide to invest, make sure you do your due diligence, think through your decisions and educate yourself to kick things off the right way successfully.  

Here at Axon, we educate, coach and mentor you to invest in property and help you set yourself up for a lifetime of investment success. 

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