I have seen info re defense housing on this site before, i have searched for previous posts but now cannot find that information.
Can people kindly give me their veiws pros/cons please. i know i can go to Parramatta to their office but i would like opinions from others who have had dealings with this type of investment.
Thanks Everyone
Hi Trustieone..
Heres a couple of topics. I searched on "DHA investment"
https://www.propertyinvesting.com/forums/property-investing/general-property/4320575
https://www.propertyinvesting.com/forums/property-investing/general-property/4322502
You could also try "defence force housing"
I've never had a DHA property but looked into it quite extensively, it depends on what your goals are. If you want hassle free, 15 years of renting but are prepared to pay a premium to buy and maintain with the management fees, etc. they mey suit.
Regards
TonyI have not invested in Defence housing myself. However, someone I know works for the Defence Force and had these warnings….
1. You may (will) have a long lease that sounds good now, but is there a clause prohibiting increase of rents over a period of eg 5 yrs! (Could leave you well behind.
2. Your buying price is often over-inflated ie you pay too much for the property!
3. You may only be able to sell back to the Defence force at their chosen price, during the term of the lease. Even if not, if your lease at time of sale is eg $100 pw behind local rates, then what investor will want to buy it?All of this info is as I remember him saying, not sure exactly. But a few things to look at very carefully, read all ypour fine print very carefully!
Quickchick.
The DHA investment homes are something I have tended to stay away from.
In particular, one of the aspects of these investments is that rent is 'reviewed' annually and (apparently!) will never go down – only up based upon fair market rent.
Sound okay! Right?
However, consider that most of the adjacent properties are also DHA homes – consequently, the rent increase will be based on those properties as well. So, who sets the rental value? – DHA all the way!
I don't believe this is fair.
Glenn1964 wrote:The DHA investment homes are something I have tended to stay away from.In particular, one of the aspects of these investments is that rent is 'reviewed' annually and (apparently!) will never go down – only up based upon fair market rent.
Sound okay! Right?
However, consider that most of the adjacent properties are also DHA homes – consequently, the rent increase will be based on those properties as well. So, who sets the rental value? – DHA all the way!
I don't believe this is fair.
Thanks everyone for the replies,the knowledge on this site is fantastic
If i were to proceed with this type of investment now i have obtained some good feedback the first thing is i would only buy where the DHA property was NOT amongst a suburb full of them.
Please keep your feedback coming as i find it very useful when doing my research.Trustie
Aj_Richo wrote:I've never had a DHA property but looked into it quite extensively, it depends on what your goals are. If you want hassle free, 15 years of renting but are prepared to pay a premium to buy and maintain with the management fees, etc. they mey suit.
Regards
TonyHi Tony,
I represent Defence Housing Australia and I thought I could add to your comments:
Home prices: We price to sell homes at the price we believe we can achieve in the market at that time. When we price houses we order a third party valuation and this forms the basis of the price offered to market. In the current market I believe our homes represent great value and any premium should be judged on that home in that particular market.
Management fees: For homes we charge a flat management fee of 16.5% (inc GST). This includes all property management, most maintenance and all letting, vacancy and lease costs. If you compare this fee to just the property management fee of most agents you discount all these additional costs. Access Economics compared our flat fee to variable fee offers and concluded that our offer represented value and on average savings.
quickchick wrote:I have not invested in Defence housing myself. However, someone I know works for the Defence Force and had these warnings….
1. You may (will) have a long lease that sounds good now, but is there a clause prohibiting increase of rents over a period of eg 5 yrs! (Could leave you well behind.
2. Your buying price is often over-inflated ie you pay too much for the property!
3. You may only be able to sell back to the Defence force at their chosen price, during the term of the lease. Even if not, if your lease at time of sale is eg $100 pw behind local rates, then what investor will want to buy it?All of this info is as I remember him saying, not sure exactly. But a few things to look at very carefully, read all ypour fine print very carefully!
Quickchick.
Hi Quickchick. We have no clause restricting rent growth for the owner/investor. If you buy a Defence home you get a review every December by an independent valuer. If you rent rises will depend on if rents are rising or falling in that area. DHA does not influence the valuation and in fact the rent we pay the owner is the rent we recieve from Defence so there is no incentive for DHA to cap rents.
An onwer can sell their home leased to DHA to anyone during the term of the lease. The lease stays with the home. You do not have to sell the home back to DHA. Selling a home with a lease attached and a tenat residing can be harder than if the home is vacant and with no lease as most agents do not sell homes this way. DHA homes typically have 9+3 and 12+3 year leases.
I recently attended 2 auctions 1 in Canberra & 1 InSydney Nov 08
Wespac was selling a portfolio about 73 DFA properties in total, i attended these auctions but not before making many enquiries to the Various Ray White agents where some of these were located the agents gave me the impression (possibly just to get me there) that the yeilds may be better than normal as Wespac was keen to sell them,i told the agents that for me buying these properties from DFA didnt suit me as the current yeilds were too low and the purchase price too high,so I took on board what the agents said and decided to put 2 days aside and go to both these auctions in a hope that the yeilds might be as i was led to believe better than buying through DFA.
At Canberra it was a joke not one property sold out of about 33 at the auction and the prices were pretty steep,there were some investors there, with most properties not even being bid on once the sellers bid was announced.
I was shocked to see so many agents there as well i am sure they out numberd the bidders.
In Sydney the next day again most did not sell however they did sell maybe 4 of 30 but again the amount of agent was astounding,they were everywhere.
There was some properties being sold in QLD on day 3 (after sydney) but i decided not to go after Cambeera & Sydney so i dont know how many Wespac DFAproperties sold in that state.I didnt waste my 2 days i dont think, it just reinforced my veiws that you must be careful about what you are told in this industry .
Hi
As far as I was aware you can also offer your home to DHA (Defence Housing), providing it meets their criteria. There used to be that info on the site. So you could see what areas and house types etc are for sale on their site, alot of the time they are in new estates. So you could possibly buy through normal channels and then look into the option of leasing it through Defence, thus hopefully being able to avoide an inflated price.
Stacey
trustieone wrote:I didnt waste my 2 days i dont think, it just reinforced my veiws that you must be careful about what you are told in this industry .
The properties that you mention were properties that Westpac Funds Management Limited purchased on a bulk basis from DHA in prior years. The lease attached to these properties is different from the lease offered to individual buyers and should not be confused with the standard DHA lease.
DHA will fully disclose all details of the house, sale terms, and lease terms prior to a buyer making a commitment. We are not interested in establishing a long term relationship with a buyer who does not know what they are getting and the mutual obligations. It is our intent and goal to make sure what you are told is what you get and as a government business an obligation we take very seriously. After all how many property sellers then turn round and make a long term relationship based on the asset sold with the buyer.
Starting yields for DHA homes are gross between 4 to 6%. Most homes I now see being priced are at high 4%'s to low to mid 5%. This is rising as rents on general are increasing and values are on average holding.
I can tell you that DHA homes are selling very well and have done throughout the backdrop of a more uncertain fiscal climate.
staceyo wrote:HiAs far as I was aware you can also offer your home to DHA (Defence Housing), providing it meets their criteria. There used to be that info on the site. So you could see what areas and house types etc are for sale on their site, alot of the time they are in new estates. So you could possibly buy through normal channels and then look into the option of leasing it through Defence, thus hopefully being able to avoide an inflated price.
Stacey
Stacey that is correct. We welcome and indeed are eager to have homes presented to us for direct lease – providing it meets Defence criteria – which can be tough. We will help pay for some capital inclusions to bring a house up to standard. Even so some features often seen as a value on the private market, such as pools, are cause for a a rejection.
Another thought in these tighter economic times…
I am not really voicing an opinion, just a thought which may be way off centre.
I wonder if the government, needing to tighten up financially, will spend less on defence, ie less members employed and needing housing? If so, existing leases would of course need to be honoured anyway.
My feeling is that areas will always be the key to defence housing. If someone owns a house and a new army base s established in the area, it would have to be good for your rental. On the other hand, sometimes babses are moved to another location, so the reverse is always possible, too.
quickchick
quickchick wrote:Another thought in these tighter economic times…I am not really voicing an opinion, just a thought which may be way off centre.
I wonder if the government, needing to tighten up financially, will spend less on defence, ie less members employed and needing housing? If so, existing leases would of course need to be honoured anyway.
My feeling is that areas will always be the key to defence housing. If someone owns a house and a new army base s established in the area, it would have to be good for your rental. On the other hand, sometimes babses are moved to another location, so the reverse is always possible, too.
Quickchick
We get asked this question a bit. I cannot comment on Defence growth but I can tell you that our housing portfolio is growing not declining.
Regardless the lease is with DHA and would be honored even if Defence moved out of an area.
Also the major growth in Defence bases are in Brisbane, Ipswich, Adelaide, Townsville, Darwin, Canberra as well as significant presence in Sydney, Hunter, Melbourne as well as regional NSW and Victoria. Most large bases have been there a long time (look at Garden Island in near CBD Sydney).
There is a diverse range of alternatives always on offer and we always buy and build with attractiveness to investors in mind – thsi includes consideration for the future of the market.
I can tell you the hot markets right now for our homes are Adelaide, Canberra, Melbourne and Darwin. SEQLD is always popular and many Sydney residents like the value of buying in the Hunter, Nowra (Jervis Bay) area and Wagga.
I think you make some good comments about investors picking where growth might be and where Defence growth might aid this. You can see this in Townsville and Darwin where the numbers of Defence people are material in those regions.
quickchick
Defence Housing Australia wrote:quickchick wrote:Another thought in these tighter economic times…I am not really voicing an opinion, just a thought which may be way off centre.
I wonder if the government, needing to tighten up financially, will spend less on defence, ie less members employed and needing housing? If so, existing leases would of course need to be honoured anyway.
My feeling is that areas will always be the key to defence housing. If someone owns a house and a new army base s established in the area, it would have to be good for your rental. On the other hand, sometimes babses are moved to another location, so the reverse is always possible, too.
Quickchick
We get asked this question a bit. I cannot comment on Defence growth but I can tell you that our housing portfolio is growing not declining.
Regardless the lease is with DHA and would be honored even if Defence moved out of an area.
Also the major growth in Defence bases are in Brisbane, Ipswich, Adelaide, Townsville, Darwin, Canberra as well as significant presence in Sydney, Hunter, Melbourne as well as regional NSW and Victoria. Most large bases have been there a long time (look at Garden Island in near CBD Sydney).
There is a diverse range of alternatives always on offer and we always buy and build with attractiveness to investors in mind – thsi includes consideration for the future of the market.
I can tell you the hot markets right now for our homes are Adelaide, Canberra, Melbourne and Darwin. SEQLD is always popular and many Sydney residents like the value of buying in the Hunter, Nowra (Jervis Bay) area and Wagga.
I think you make some good comments about investors picking where growth might be and where Defence growth might aid this. You can see this in Townsville and Darwin where the numbers of Defence people are material in those regions.
quickchick
Edit: I wrote this note quickchick.
Defence Housing Australia
A 3 bed DHA townhouse recently sold near me. It had been on the market for over 12 months. Yield was around 6%. Long leases may give you security but it serverely limits your potential buyer pool should you need to sell.
You don't have to go through DHA and pay "fair" market value. Plenty of distressed vendors willing to negotiate.
emptypockets wrote:A 3 bed DHA townhouse recently sold near me. It had been on the market for over 12 months. Yield was around 6%. Long leases may give you security but it serverely limits your potential buyer pool should you need to sell.
You don't have to go through DHA and pay "fair" market value. Plenty of distressed vendors willing to negotiate.
Dear emptypockets,
Again, I am a representative of Defence Housing Australia.
We find that the speed of a mid lease resell by an investor depends on the market conditions in the sale area, experience of the agent in selling investment properties with leases attached (common in the commercial and retail sectors), and of course the price expectation.
We don't count the actual number of mid lease resells, but it is not significant versus the total number of DHA leased (sold to investors) homes. Pehaps 1-2% of over 11,000+ per year.
I'd hope that investors looking at DHA homes take the approach from the beginning that it is likely a low risk, easy to manage, long term commitment that has some liquidity during the term if they run into difficulties.
If you have a short term horizon goal for your property investment then perhaps another asset class is more appropriate.
Defence housing
You have defended slow sales, yeilds etc, but no comment on capital growth?
Someone in my family (a low risk investor as you said) bought one 15yrs ago with a reasonable yeild and a hassle free investement held for 10 yrs and sold it absolutue zero capital growth after sitting on the market for 18months.. At the time of purchase in 1992 the defence house 4hrs drive north from sydney cost the same as a Surry Hills terrace house in 1992 (which they were also considering, The terrace is now worth 4/5 times as much as the defence house at around $1M and being high rent area thee rental increase of at least 3/4times which would also be a better increase then on a DH. I told this person to buy the terrace. Supply and Demand is the key driver to successful investing
Oh well.
Event Horizon wrote:Defence housingYou have defended slow sales, yeilds etc, but no comment on capital growth?
Someone in my family (a low risk investor as you said) bought one 15yrs ago with a reasonable yeild and a hassle free investement held for 10 yrs and sold it absolutue zero capital growth after sitting on the market for 18months.. At the time of purchase in 1992 the defence house 4hrs drive north from sydney cost the same as a Surry Hills terrace house in 1992 (which they were also considering, The terrace is now worth 4/5 times as much as the defence house at around $1M and being high rent area thee rental increase of at least 3/4times which would also be a better increase then on a DH. I told this person to buy the terrace. Supply and Demand is the key driver to successful investing
Oh well.
Dear Event Horizon,
Capital gains, and as you have exampled, will be a product of the particular house in a particular market.
For the homes we sell there will be homes that have a range of gains, or perhaps losses.
We sell homes in many cities, suburbs and regions. At any one time you can pick – for example: right now you can pick from homes in the north side of Brisbane, Darwin, Townsville, Adelaide, Perth, the Hunter, Canberra etc..I cannot comment on the homes available 15-years ago, but I can say with confidence that today the homes we offer and salt and peppered in the general community and property market. They are high standard, well built, 3 and 4 bedroom dwellings. Their gains potential will be as good as the markets their in at the end of the lease.
Can you find potential investments that will out perform our proposition – most likely. But that may also come with more risk and effort.
Thanks for your note.
DHA.
What are they they selling? (When it comes to DEFENSE HOUSING)
A PACKAGED DEAL offering SECURED RENT over the lifetime of your investment.
A "hassle free" investment property that is to assist in securing your financial independance and with a "promised" government guarentee that ensures you receive strong rental returns over the long term (and appreciate substantial Capital Gains).– – – The truth of the matter is this:
If you stick to good quality property in good locations (over the medium – long term), you can not go wrong!
Do your research and you can purchase better located properties, with better rental returns, with lower commissions (if any).
THIS IS A GREAT TIME to be scouting top quality properties. Buy BIG, lock in the FIXED INTEREST RATE, and play it for 3 years from now. SECURE yourself a f*cking great deal now and THANK YOURSELF 10 years from now!!Anthony Campbell
[email protected]I have had a DHA property in Brisbane for 2 years. My opinion on the main issues raised are:
1. Price – the properties are usually higher than market value but you can win here with a bit of research and some patience. We paid $450,000 for our property (this is in a complex amongst the same type of properties so it is easy to value), it had been listed on the website for sale for at least 4 months. It was about $20,000 over the odds when listed but over the intervening period the price of private sales of the same properties rose and one exactly the same as ours sold for $479,000 just before our contract went through. You really have to be lucky though. A lot of these properties sell very quickly and we missed a number of properties before deciding to look at this one so getiing this under the odds was a combination of luck and patience.
2. Rent – It is valued on 31/12 of every year by a supposedly independent valuer. Our initial rent was $375 and in 2008 it was increased to $410. This was way below par and we invoked the appeal process under the contract. Our valuer came back at $480 per week and we eventually agreed to $465 a week. The process was relatively easy but cost me $375 for the independent valuer despite the fact that we were right. Just got our new rent valuation which they reckon has gone up a whole $5 per week to $470 a week (many people in Brisbane will be astounded to know that rents have only increased by 1.05% over the year!!!!!!!!!!!!!!) . No doubt we will be appealing again as my property type is achieving rents in excess of $500 per week. It is my opinion that DHA try to keep rents down and you need to keep a close eye on them and I suppose this is natural when they have 11,000+ properties. We keep all evidence of rents advertised during the year (once again we are assisted by the fact that there are only 3 types of property within the complex which makes direct comparison easy) from http://www.realestate.com and http://www.domain.com.au.
3. Lease Fees – Units pay 13.5% gross rental for lease and repairs and maintenance. I reckon this is a great deal having a current average of 18.6% on agent costs, repairs and rental vacancy periods on our other non DHA rentals. I read the Access Economics report that a previous poster pointed out. I agree with most of it's conclusions and the lease fees are more than reasonable in my opinion.
4. Set and Forget – Apart from the previous comments about having to monitor the rents offered closely, this truly is a set and forget investment. We have never had such a worry free property investment and we simply do not think about tenants, property maintenance etc. with this place. The new paint, floor coverings at the end of lease is another bonus that will save $$$$. This is a more than welcome change and is nearly enough to convince me to buy another property by itself.
5. Capital Growth – This depends on what and where you buy like every other property investment. Like every other property investment buy the best located property you can afford and you should get reasonable capital growth. We are looking at about 12% per year at the moment which is obviously slowing down rapidly.
6. Lease – Ours is a 12+3 which is exactly what we wanted. 12 years (at least 11 years with the 1 year early get out clause) of rent paid for every day is value.
You need to watch the rent reviews closely and make sure that you have a good knowledge of the local rental market as you cannot trust DHA's so called independent valuer. This is the only downside though so all in all a good investment brought about be being a bit lucky with the purchase price.
CheersPitto
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