Ask Paul: Should I invest in Defence Housing Australia?

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Dear Paul,

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. 

ask paul clitheroe should i invest in defence housing australia

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.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. Please view our disclaimer here.
Comments
Paul Dawson
April 28, 2021 5.00pm

I heard D.H.A charge heigh fees,but there is probably because of high maintainance.

If you send a enquiry they dont leave you alone and i mean it

Jo Baker
May 3, 2021 7.58pm

DHA property selling price is considered to be more expensive to buy compared to other properties in the same area.

Bob Bobson
May 3, 2021 10.38pm

I bought a place near Rockingham WA.

4 bed 450k, in 2010.

It is now worth less than when I bought.

Rent is back to where it was on 2010.

DHA is a scan. Even leaving the money as cash in the bank would have been better.

The only good thing is that I didn't lose money ??

Theofilos Mostris
May 4, 2021 7.16pm

Do not ever invest in DHA. From my experience in the Darwin market DHA only serves to flood the market with high priced properties that when you decide to sell are worth less than the cost to build it yourself It is nothing but a major scam

Peter Willis
May 5, 2021 4.44am

We have owned a DHA property for twenty years in Port Stephens. The capital growth has been good, 250% and $20000 in income per year. Yes fees are a little high but you don't get a phone call in the middle of the night for authorisation of a repair DHA repair it. Every 6 years they repaint the walls and replace the carpets at DHA cost. No complaints here.

Anthony Ramkulov
May 25, 2021 12.36pm

"Should I invest in Defence Housing Australia?"

No you shouldn't:

- Prices for houses are higher

- Rent is lower

- Contract period is short

- Admin fees are high

- Tenants don't care about damage

- Location is far from acceptable