Ask Paul: Should I invest in Defence Housing Australia?
I own around $67,000 in cash and $33,000 in a mixture of shares and ETFs. I'm looking to crack the property market in 2021. As a first-time investor, would you recommend buying a property from Defence Housing Australia?
I understand the guaranteed rental payment over the lease, plus the extra fees I would have to pay. Defence Housing also provides peace of mind as the rental aspect is taken care of, irrespective of whether the property is vacant or not.
My worry is capital growth - do these properties grow as fast as a standalone residential property? What do you recommend? - Andrew
Research, research and more research is the answer, Andrew.
Look, I am not anti-Defence Housing - guaranteed rental and maintenance during the lease period is a great thing. But all guarantees will come with some cost. In this case it may be the location of the property. I appreciate you can choose from a variety of locations and it is also a common-sense statement that we will need defence force people in perpetuity. I also see the rental yield is better than it is for a typical property.
So, after doing your research about the population growth potential and economic future of the area you are looking at and an understanding of what happens if Defence changes locations in the future, I am
not against this idea.
I do not have the data base, if one exists, on the performance of these properties.
But I would be deeply interested to understand how they stacked up against, say a well-located investment property in a rapid growth area, near public transport, restaurants, health service, schools etc. My suspicion is the capital growth here would have more potential.
It may be you want a low- stress property, and in this case a Defence home could be good. But I am left feeling you may do better, in navy speak, steering your own ship.