Investment Property with Defence Housing Australia: A Balanced Perspective

Alex

Investing in an investment property managed by Defence Housing Australia (DHA) offers a low-risk, minimal involvement opportunity for investors seeking a passive income stream. With guaranteed rental income, scheduled rent reviews and professional property management, DHA-managed properties provide a hassle-free investment experience, for those more risk-averse. Having had an investment property with DHA investments these are my personal insights and recommendations from a future DHA property owner and those seeking to get a more balanced overview.

Investing in an investment property is a popular strategy for building wealth and securing financial stability. Among the various investment options available, properties managed by Defence Housing Australia (DHA) offer a unique opportunity. While this arrangement comes with several benefits, it also has its downsides. Here, I will explore both aspects to provide a comprehensive view for potential investors.

A Quick Overview of the DHA System

A bit of an overview first and why it was set up to begin with…  The Australian Defence Housing investments refer to residential properties that are leased and managed by Defence Housing Australia (Federally). DHA is a government entity that provides housing solutions to members of the Australian Defence Force and their families, when they move around from location to location. These investments offer a unique opportunity for investors to benefit from secure, long-term rental income while contributing to the welfare of Defence personnel.

The DHA system is designed to meet the housing needs of Defence personnel by leasing properties from private investors. DHA manages these properties, ensuring they are maintained to a high standard and that rent is paid on time, even if the property is vacant. Key features of the DHA system include:

  • Guaranteed Rental Income: DHA provides investors with a reliable rental income, typically for a lease period ranging from 3 to 12 years, with options to extend post this period.
  • Professional Property Management: DHA handles all aspects of property management, including tenant placement, property maintenance, and regular inspections.
  • Quality Tenants: Properties are primarily occupied by Defence personnel, known for their reliability and respect for property.
  • Long-Term Leases: Investors benefit from long-term lease agreements, reducing vacancy rates and providing financial stability.  Including periodic annual rent reviews.

Positives of Investing in DHA-Managed Properties

  1. Guaranteed Rental Income: One of the most significant advantages of DHA-managed investment properties is the guaranteed rental income. Regardless of whether the property is occupied, DHA ensures that investors receive rent, typically for a period of 3 to 12 years, with options available to extend this period. This provides a stable and predictable cash flow, which is particularly appealing for risk-averse investors.
  2. Professional Property Management: DHA handles all aspects of property management, including finding tenants, conducting inspections, and addressing maintenance issues. This hands-off approach can save investors time and effort, allowing them to focus on other investments or personal pursuits.
  3. Quality Tenants: Tenants in DHA properties are predominantly Defence personnel, who are generally reliable and responsible. This reduces the risk of tenant-related issues and ensures that the property is well-maintained.
  4. Long-Term Lease Agreements: DHA typically offers long-term lease agreements, providing investors with extended security and reducing the turnover rate. This long-term commitment can lead to lower vacancy rates and less stress for investors.  Also at the end of the lease term, the property is brought up to a high standard, by way of replacing the carpet (eg: flooring), completing any repairs and painting the interior.
  5. Expense Management: Essential expenses like rates and water bills are automatically deducted from the monthly rental income. This further simplifies the investment process and ensures that all critical payments are managed without investor intervention.

Negatives of Investing in DHA-Managed Properties

  1. Limited Capital Growth: Properties leased to DHA are often located in areas with moderate capital growth prospects. The guaranteed rental income can come at the expense of potential appreciation in property value, which might be lower compared to other high-growth areas.  As the location of property does all the heavy lifting with respects to capital growth.
  2. Resale Restrictions: Selling a DHA property can be more challenging due to specific resale restrictions (by way of attached contract) and a smaller market of interested buyers, unless selling when the contract has finished. Potential buyers must also be willing to accept the terms of the DHA lease, which can limit the pool of prospective investors only, as you can not occupy the property as a PPOR during the contract term.
  3. Management Fees: While DHA provides comprehensive property management, this service comes at a cost. The higher management fees are higher than those charged by conventional property managers, impacting overall returns on investment.  This can be up too, 2 times the standard fee.
  4. Less Control Over Property: Investors have less control over their investment property under DHA management. Any alterations or improvements need to be approved by DHA, which might limit the ability to personalise or upgrade the property according to the investor’s preferences.

My Personal Take

As an owner of a property managed by Defence Housing Australia, I can confidently say that this investment is ideal for those seeking a low-risk, minimal involvement, way to enter and purchase an investment property.  Most people who purchase one, end up purchasing additional properties over their investment journey.  The guaranteed rental income and professional property management make this a highly passive investment. Also, additional expenses like council rates, insurance and water bills, can be automatically deducted from the monthly income further enhancing the hassle-free experience, wrapping up the ins and outs, making it easier to manage and around tax time..

For investors who prioritise security and appreciate a hands-off approach, DHA-managed properties represent an excellent choice. While the potential for high capital growth might be lower, the stability and ease of management does compensate for it. However, if you are seeking higher capital appreciation / growth and greater control over your investment property, exploring other real estate investment options might be more suitable.  If you are looking to enter the market and see yourself holding on to the property post contract term, the DHA might be a great stepping stone for those apprehensive of entering the property market initially, but will seek to benefit from growth over the long term, be it greater than 10 to 15 years..

About Alex Carpenter

Alex Carpenter is a highly experienced residential buyer’s agent and real estate professional, renowned for her dedication, market expertise, and personalized client service throughout her more than ten years in the industry. Known for uncovering hidden property gems and negotiating favorable deals, she has become a trusted advisor to both first-time buyers and seasoned investors. Further to this, Alex is passionate about researching, exploring and reviewing gentrifying and up-and-coming suburbs with strong community involvement and diverse culture. She is often found exploring new and older neighbourhoods or volunteering at local initiatives.