Westpac and Defence Force Housing

We have purchased 2 properties from DHA in the last 6 years, one in Syd and one inTownsville, North Queensland. Both were on leaseback arrangements.

I agree that the Mgmt fees are rather high, however, what you need to take into consideration is the guaranteed tenancy for that term as well as maintenance performed over that period. We did find the (Non Negotiable) properties slightly higher than similiar private market, however this was not enough to discourage us away and we have enjoyed generous growth on both the properties in the relatively short term that we have had them.

Having said this, DHA is not the answer for everyone and it is by no means a no-brainer. We conducted all the usual due diligence and property/suburb researches before laying down a deposit as well as Financial Position calculations.

Overall we have been very happy with the DHA system, and I continue to search the DHA site for new opportunities.

Just a warning for those who are planning to buy dha properties. Their prices are HIGHLY inflatted and lots of them are in areas that you will find hard to lease after defense moves out. they are also build differenly than the normal average person would like to live in . i.e they are mor commercially built.
Buyer just Beware

I agree with Simon’s comments. I also have first hand experience with DHA as a tenant and manager of troops. Many of my friends have DHA investment homes. Some are happy, some think it was a mistake. They are long term, non-negotiable, have high fees & fixed term investments bought at high prices compared to other homes in the area. They are hard to onsell. Very illiquid.

If I had to choose between parking $400k+ in a DHA house or managed fund, I would choose the managed fund hands down. Not the REIT either. (not that I prescribe to manage funds by the way) But for some ppl, a DHA investment might just suit their mindset and subdue their inner fears about residential investment. But not me.

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…emotion clouds good judgement but is a defining element of character.

Dear All,

Interesting discussion, but take it from Westpac point of view. They want to use some excess lending money, flog off the trust (to our super guarantee funds for capital stable portfolios) in time and collect ongoing fees and loans from the REIT! Simple, Westpac is creating a vehicle from which it can generate more fees from in the future.

You may have to look beyond the obvious for the real reasons!

Cheers.

Hi all

As a baby investor, I read the responses with interest. We looked at using DHA as possible clients but found that their requirements for houses were too restrictive. They list a lot of “basic” requirements that, as in investor, I would not normally include – such as mulch on the gardens, space for a freezer, privacy and security on all windows, doors and entrances, etc. They also have specific locations in which they are interested whi ch may or may not suit the investor. Hence, we decided the returns were not suitable for us at this stage.

Local gossip says that the Borneo Barracks, just outside Toowoomba, QLD will close in about 3 years as their lease on the land is finished. Local gossip in SA also says that Elizabieth is going to expand as a battallion is moving in (just after a possible exodus from the Holden employees) so the timing of the two pieces of gossip is very interesting. Has anyone else heard anything along these lines??? And is there an opportunity here???

Hi, this is interesting cos I’ve been considering DHA properties & finally rejected it – same numbers : about 6% yield on an inflated price. The price has built in 10 years of +ve appreciation. I worked this on the actual houses advertised here in Adelaide. I was interested in the double-storey houses, those in Windsor Gdns and Greenacres. The reason is the building cost of 2-storey houses is very high & therefore, at the end of the tenancy, this type of residential building will still command the price. I’m not particularly rapt with the suburb though. The location is not the best. In Adelaide, Mawson Lakes is the supposedly new ‘hip’ location. The houses there are new and big and overpriced. The suburb is outer suburb Northern. My property manager specializes in these N suburbs & he says that Golden Grove has been devalued by the hordes of young hooligans who live there now. Even the police do not want to be working there. He reckons that these people will move to Mawson Lakes next. If I’m not mistaken, Mawson Lakes has large numbers of DHA housing.

Maybe someone from Adelaide has something to add.

Also, this is not the first REIT. It may be the first listed residential property trust but REITs have been around for a while. There are several unlisted residential property trusts and many listed commercial REITs and mixed REITs. I regularly get sent information on unlisted ones.

If anyone is contemplating investing in a listed REIT, a good stockbroker is able to give advice as that is the market in which listed REITs operate. All the big stockbrokers have regular information sheets on the market segment.

mum

I think the defence housing, if brought at a good price would work really well. My husband and I have an investment unit in similar minded principle. It’s a holiday letting, everyone is guaranteed a particular amount of base rent every month and depending on the occupancy rate we all receive a portion of the occupancy rate which varies depending how many people stay within the month. So I think guaranteed income can really work with the defence housing, again if you can get it at a price which is positive gearing or close to it.

As for the Real Estate Investment Trust (REIT) I am not really sure I would be to keen to dive in???

I looked extensively at DHA figures. Yes there are advantages to having guarrenteed rent for a period of up to 13 years, but that appears to be the only upside, well that and the fact the defence force will renovate the property post lease off period.

I found the prices of the properties somewhat our of touch with existing proerties in the same areas. For example Epping, two bedroomed new townhouse were going for approx 100k higher than the mean price for properties in that post code (residex 2006). Even though there will be continued growth in rental yields over the next 12 to 18 months, there is still a formidable amount of negative gearing required. Added to that the 16 % management fee required per week to maintain the property. Now work out the numbers required to make this sustainable on a 600k house or townhouse. In my opinion, there are too many cons for these properties vs the pro’s. Dont take my word for it though. Log onto the DHA web site and do the figures yourself, even savvy investors can see the numbers dont add up simply for the peace of mind yo have a continual tenant in place

D

DAB