Anyone appealed a DHA rental valuation?

[aw1]

Hi All

I bought a property from DHA a year ago now and the capital growth has been fantastic - around 25% in the one year. The reason for this I think is partially due to the fact that it was undervalued when sold to me.

I am having a problem with the rental valuations however. In December last year I received a revaluation certificate from DHA stating that they were increasing rent from $430 to $440 a week, a measly 2.3% increase in a market that has grown far quicker. There were much smaller properties (250m2 under roof) with no views (this backs onto a lake) renting for $500 a week in the same street. The comparable properties on the valuation (there were 3) were also chosen to minimise the rent - they were certainly not representative of the area in general. I chose not to appeal as I thought the increase in rent would probably be negligible after having to pay the $495 a local valuer wanted for a market rent valuation.

Fast forward to now and revaluation time is coming up again shortly. However, in the course of buying a new IP recently the DHA property was reviewed (both a normal valuation, and a market rent valuation). The market rent came in at $570 a week, which is right where I thought it would have sit in the first place. The house is 373m2 under roof - one of the biggest houses in the area.

So I now have ammo for the upcoming revaluation, where I suspect they will try and go as low as possible again. Is there anything else I can do to make a strong case. Should I collect my own comparables as well? I presume this valuation that was just done will be too old to use for the DHA reval in December, so I will probably have to get it valued again (I will use the same valuer who appraised it at $570 a week).

Adam

 

[geoffw]

I have appealed a rental appraisal successfully.

I knew one loal REA very well. When I was surprised by a low appraisal, I asked him, and he checked his records. It turned out that he was managing one just across the street, nearly identical in terms of specs. It was being let out at $80pw higher. The REA also had a few more comparables to help me with the appeal.

I appealed, and got a $50pw rise.

18 months ago, rents had gone up a lot, and I was expecting another appeal. But I received a fair rise.

I am expecting another good rise in January this year, in line with the rest of the Canberra market.

They really aren't out to screw you.

 

[aw1]

Well my revaluation came in again this week at a very disappointing 6.8% increase to $470pw (the rental market here has moved closer to 25%). I spoke to a local real estate agent who has sold the property in question 3 times before and she spoke to the property mgmt division of her company and they said they would easily let the property @ $600pw. The agent provided comparable properties leased around the $600pw mark for me.

So I've got my ammo now and a local valuer with experience in the area will be doing a market rent valuation next week. They will be contacting the agency I spoke to with the relevant comparables.

Even if DHA end up meeting me halfway I'll be happy

Anybody else had any shocks/surprises with the latest round of DHA revaluations?

 

[steveadl]

Jeez, $130pw!!?! When does your lease with them expire? Run like hell when it does!!

 

[aw1]

Hi Steve
Lease expires 2011 I think with a further 3 year option (I'm sure they'll drop the option if the rent has to be adjusted markedly as a result of this appeal )

Overall I'm very happy - they've fixed a few things and informed me of it, I think the rental management fee is reasonable considering there is no vacancy, and I don't have to pay for water usage (only the supply charge) - generally up here you pay for the water usage if it isn't excessive. It was also an absolutely terrific bargain when I bought it for $485k. It would likely fetch mid $600K's on the market now only 15 months on.

 

[geoffw]

I've received my annual review. I've received a 10% increase- which, upon checking with my local REA, is in line with the market in that suburb.

The letter I received now states that I must pay the costs of a reappraisal if I choose to appeal. I don't know that that was there before.

 

[aw1]

That clause was in there last year and the year before. It's what actually stopped me from appealing it last year. I really regret not appealing it now.. as I feel it sets a precedent for them to set the new rent upon. I know they are not supposed to do this (it is supposed to be a fresh valuation).. but I bet it happens. For example if I appealed last year when they put it up to 440 and got it raised to 500, it seems unlikely I would have received a rental appraisal of 470 a week this year.

 

[Bargain Hunter]

It seems abit rough that you have to pay for them to do what they should be doing in the first place.

The cost of a re-evaluation is about ten weeks of the increased rent. If you have strong evidence then I would get the property upto the correct rental and then hopefully moving forward the rent increases will be in line with the market.

Regards

Andrew

 

[aw1]

Well the results of this are FINALLY in (its now April).

I am so pissed off with DHA and feel like I have been royally screwed.

The secondary valuation came in at $550 a week, which is $80 more than the original valuation but I feel still has plenty of bias in it because DHA uses the valuer who did the secondary valuation to do bulk revaluations of their properties every year. There were no available valuers to do the secondary valuation who were not on DHA's panel. Real estate agents still insist that $600 a week is much more realistic.

Despite all this, they call me and offer me $530 a week after months of waiting. Supposedly they have 'strong evidence' that $530pw is correct. If this is the case, then what the hell did they initially send me a valuation of $470pw! Pretty contradictory.

To add insult to injury I recieved DHA's latest sales pitch today via e-mail which is guaranteed commencing yields of 5.7% on selected properties. Keep in mind that I am leasing them a ~$650k-odd property at $530pw now. They are offering properties in adjancent, lower quality suburbs, smaller houses with no views at sale prices of $545k and $597 a week rent (a 5.7% yield) as a "special promotion". I blew a fuse when I saw this.

I had accepted the $530pw offer from DHA verbally, but I will be contacting them tomorrow to retract it (I presume I have to sign prior to it taking effect anyway) and pursuing the final route which is having the API appoint a valuer to do the revaluation and DHA and I split the cost of the valuation.

I had to pay for the secondary valuation (nearly $500) and will not be reimbursed for this either.

Certainly no more DHA properties for me.

 

[geoffw]

To put something into balance.

My DHA property in Canberra has achieved a capital growth of more than 7% pa for the last 10 years. So it's more than doubled.

Purchase $200K, value $400K. Growth now averaging $40K pa over the 10 years.

My rent is now about $18K pa.

It's been CF+ for 5+ years.

So the growth is now double the rent.

And the rent has been covering interest for a few years now.

Don't just look at the rent. Property investment has as much (if not a lot more) to do with growth.

 

[aw1]

I understand that, but capital growth of the property is none of DHA's business. If they sell me a million dollar property for $500,000, it shouldn't negate their obligation in the lease to pay me market rent.

It is a matter of principle, I don't find it fair for them to presume "well you made good money out of the capital growth, so we're going to stiff you on the rent". This property will certainly not be cash-flow positive while DHA is leasing it for a very long time. On the private rental market we'd be a lot closer.

 

[aw1]

Dredging up an old thread.

December 2008 rounds of rental valuations have just come through and DHA didn't muck me about this year. Don't need to appeal!

They increased the rent on my property by $170 per week to $700 per week! Very happy - it is sitting right where it should be now. Makes the years of underpaid rent fade into the distance...

Property is probably in the $650-700k range and is now cashflow neutral after tax and depreciation which is a pretty good effort having only owned it 2 years and purchasing for $485k.

Another property I bought in the same suburb a little over a year ago has just gone cashflow neutral too.

These are both on fixed loans in the 7% range. They were also 100%+costs lends too. When they are re-fixed it should be looking very pretty!!

 

[Y33]

$700/week is excellent for that area. Quite a few others are around the $450-600 range. DHA can be a good invest and forget situation and depending on the market will actually inflate the rents in that area to justify the % they charge for management and to make it look more appealing to investors.

Did you buy from another investor with a DHA lease or from DHA directly?

 

[MJD]

Hi AW1,
I also have one DHA IP in Rosebery NT , rent went up from 555 to 580, not as much as I expect, what suburb is your IP please ( which received $700 rent). I am thinking of proceed rental dispute
thanks
MJ

 

[want2bewealthy]

Yea I just bought one in Bakewell, another 1 year of DHA . . they took the option of the 1 year renewal and market rent is about $60 per week more than Im getting. they generally try to keep it cheap and I can put up with it or dispute,

 

[aw1]

$700/week is excellent for that area. Quite a few others are around the $450-600 range. DHA can be a good invest and forget situation and depending on the market will actually inflate the rents in that area to justify the % they charge for management and to make it look more appealing to investors.

Did you buy from another investor with a DHA lease or from DHA directly?

The rent is about right for Durack considering the property is also one of the largest in the suburb and in one of the best positions. It really is a top shelf property - I'd love to live in it in future.

I bought from DHA directly in 2006. I have other non DHA property as well.

Hi AW1,
I also have one DHA IP in Rosebery NT , rent went up from 555 to 580, not as much as I expect, what suburb is your IP please ( which received $700 rent). I am thinking of proceed rental dispute
thanks
MJ

Durack. You'd be unlikely to find a property in Rosebery achieving $700pw, they are quite different suburbs. $580pw is very good for Rosebery, what are the details of the property?

Yea I just bought one in Bakewell, another 1 year of DHA . . they took the option of the 1 year renewal and market rent is about $60 per week more than Im getting. they generally try to keep it cheap and I can put up with it or dispute,

That has been my experience too, until now. I really complained loudly last year especially after the slap in the face where they were offering much higher rents on poor quality property in Rosebery as a "limited time offer". I expect them to pay market rent, not adjust rents as they please on the basis of expectations of capital gains. I probably evaluate 50 properties for every one I buy so I was pleased to have bought some gems and its great to finally see it getting market rent.

 

[want2bewealthy]

I spoke to someone at DHA and they tell me the rent appraisal is performed on the 31st December each year, you have to be quick to argue if it seems low, 30 days from start to finish from the 31st.

Mine came in 'about' right, I would have tried for a little more though personally, it was what I thought it would have came to,

The thing I hate the most is not having the ability to take control when I please,

 

[MJD]

Durack. You'd be unlikely to find a property in Rosebery achieving $700pw, they are quite different suburbs. $580pw is very good for Rosebery, what are the details of the property?


it's a 5 bed homes built in 2006 and I bought it sept 2007, I thought It was at the peak , not sure about the price for that now,

 

[want2bewealthy]

Durack. You'd be unlikely to find a property in Rosebery achieving $700pw, they are quite different suburbs. $580pw is very good for Rosebery, what are the details of the property?


it's a 5 bed homes built in 2006 and I bought it sept 2007, I thought It was at the peak , not sure about the price for that now,

Youd 'think' you bought at peak but you certainly did not, weve been at peak for 2 years now.

 

[MJD]

registered valuer in Darwin

can anyone recommend a valuer to do the rent appraisal in Darwin please, as I want to get the second opinion for my property in Rosebery
thanks
Mj