Investing in DHA Property

Those of you who know me, will know that I am a great fan of investing in DHA (Defence Homes Australia) Property.

Why? Because I believe it provides a low level of risk which is particularly suitable for entities such as SMSFs (Self Managed Superannuation Funds).

With guaranteed yields for periods up to 12 years (with an 80% chance of gaining an extra 3 years), it allows buyers to plan long term.

Critics of the investment sight high agent fees and poor capital gains as reasons why this type of investment should not be part of a diversified portfolio but that has not been my experience.

The fees charged (16.5% for a house or 13.5% for an apartment/unit with a body corporate) is about twice what a real estate agent would charge, but when you consider the rental guarantee , the maintenance services included and the fact that the property is repainted, recarpeted and restored to its original condition at the end of the lease, it is not hard to see the value associated with it.

There is no need for landlord insurance, garden maintenance contracts and no weeks (or even months) of no rent due to it being unoccupied.

In regards to the lower capital growth, this is very much due to location as these properties tend to be in newer estates.  They are no different to the other (non DHA) properties in the estate. The suggestion of some that you pay a bit more to buy them is generally not borne out by the statistics and neither is the suggestion that the sale prices are significantly lower.

So, all-in-all, the guaranteed rent (which will move with the market but can never drop below the contract rate) combined with a growth rate of (say) 6% (the long term growth rate in Australia is 8%) means potentially double digit returns for a decade or more!

Now you can see why I consider DHA property should be part of a diversified portfolio, particularly inside a SMSF.

Any questions?


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