So I am looking at buying a house through the defence house scheme
They have a lease agreement in place etc ranging from 5-9 years
Rent is guaranteed ie government pays etc
They charge 12% management fee which is ok I suppose.
I am not sure about them refurbishing the place etc
The reason I like it is because the rent is guaranteed.
Return is not too bad ie 5%.
Remember,no work etc to be done.
They do the lot.
Any of u guys have or experienced this sort of scheme before?
Ps House is approx. $600K
Rentals is $550 a week or so
Buying a Defence Force Housing Property-Any Experiences?
grabngo on 04/02/2015 - 15:10
Last edited 04/02/2015 - 15:11
Last edited 04/02/2015 - 15:11
Comments
It sounds like you have already decided you will go with it.
You are probably just looking to get your ego stroked.
4.1% return right now is not too bad, but this is a long term investment and if interest rates go up (you could get 6% or 7% from online savings accounts not that long ago)and the rent stays at that level it will not be that good. Is there any possibility of a good capital gain? CG is what normally makes rental properties a good investment, not rental return.
Agree with SOZ. The downsides if you really want to hear it:
- 12% management fee is high for property manager, but I guess not so bad if you are pretty much guaranteed a do-up at the end of your lease. Usually property managers charge between 7-8%.
- You cannot get out of DHA contract, ie. if you decide a year from now you want to move into your property, you can't.
- Usually, they have a fixed lease with an extension option for another few more years, which I heard they take up usually.
- Because of the fixed DHA lease, your house price appreciation ie. capital gains is limited by your rent growth, because the house essentially becomes a fixed income asset for the duration of the lease.
I could be wrong, happy to be corrected.
Mixed emotions right there….
like saying go to hell but enjoy the ride….lol
Just thought I would expand the property portfolio and sit on an asset without doing much work.
I see the point of 4.1%
Capital gain is sort of expected.
Buying in ACT
Hard to predict
That 4.1% is before you factored in interest payment and rates and maintenance and tax. If you don't see any capital gain out of it then aren't you better of with a high interest saving account ?
not really better off no
Don't forget to consider if the house will go up in value. Just like hotels and student accommodation, this sounds like it's in a similar class. My question would be "how much in value do I expect this to grow in the future?"
From my research (when I was considering doing the same thing) the initial purchase price of the properties is higher than similar properties in the same area, with the same features as the defence properties. You only have a limited selection of properties to choose from and the prices are not negotiable (unlike every other property in the market). You are paying a premium for these properties and for me, the difference was far too much for it to be good value.
Sorry just want to clarify ((550/week * 52)*0.88) / 660.000 = 4.1%. Not 5%.