Defence Housing- End of lease

I've had a Defence Housing property for just over 12 years now.

It was handed back last week.

There had been a possibility that DHA would extend the lease, but they pulled the plug on that a few months ago.

For some months (perhaps a year or more, I don't know) the property was let out to private tenants- and DHA subsidised the rent to bring it up to the agreed rent.

I must say, after not having seen inside the property for 12 years, I was very surprised. Even stunned.

It was immaculate.

OK, there was fair wear and tear to paintwork around a few corners. There was some cracking- to be expected with all our dry conditions.

There was no way the carpet which was in the property was the original carpet. It was excellent.

I remember tiles in the family room which were cracked. They were all perfect last week.

The outside paintwork had deteriorated heaps. As expected. But DHA guarantee to replace carpet and interior paint after 9 years, plus exterior paint after 12 years.

They got quotes for the painting and carpeting, and paid me out according to their best quotes.

The carpeting did not need doing. And I have a mate who is a professional painter, who provided me with a much better quote than the others. Probably because most of the paintwork was already so good- he did not need to provide undercoats for most walls.

It's probably meant that payments will be treated differently for tax. If they had rejuvenated the property for me, I don't think that would have been regarded as income for me. The painting would have been regarded as a repair- but if I had to replace the carpets I'm not sure if that would have been a repair or an improvement.

For me, this new financial year, it won't be a problem. But it could have been under different circumstances.

And I am very happy that the high standard of Property Management for this property (and possibly the high standard of tenants- some very high ranking personnel) has enabled the property to be kept in such great condition.

Thank you DHA.
 
Geoff seems like a great outcome for yourself. 12 years is a long time, and personally the yield on DHA properties at the moment doesnt do it for me.

The real question, in my mind, is what is the rental ability of the property now and how does it compare to the DHA rent you were receiving?

Cheers

Ben
 
Hi Geoff,
Just wondering if there was any particular reason as to why they did not want to take out another Lease?
Is this the general trend with these DHA houses at the moment, that is, they do not have enough tenants to fill all of their housing, or is it just possibly your particular area.
BTW, great outcome of 12 years of stress-free investing!!:)

Boods
 
How long a notice did they give you that they would not be renewing. Partner has one of these and they keep telling the REA they will renew, but havent got around to the paperwork. He is wondering if they are stalling till they can get the family out of there
 
How long a notice did they give you that they would not be renewing. Partner has one of these and they keep telling the REA they will renew, but havent got around to the paperwork. He is wondering if they are stalling till they can get the family out of there

Hi Celia,
It's not so much how much warning they will give you when moving out, but they will give you plenty of notice if they want to stay!! But why would they be telling an REA who tells you? I have not heard of that situation b4 with Defence Housing. Usually it is DHA direct to you.
DHA IMO have some +ves and -ves. Usually well built homes. in fact very well built...to a standard, not a budget. They repair any problems. They make great property managers...We had a disater happen at one property and all it took from me to get it fixed was a single phone call. couldn't have been easier (What was the disaster? Glad u asked....The sewer backed up during a violent downpour and literally EXPLODED right through the house and the tenenats who had been happily wautching tv got covered in it!!! Imagine trying to deal with that one!!) :eek:
never a late payment and always paid every month.
As Geoff said, they leave the property immaculate.

Minuses-----16.5% management fees.
Very hard to sell, at market value, if you need to get out of the contract early.
Can be in "army" centric areas.
Tend to ask top dollar for sale price....returns can be a bit lean.
You can't make any improvements really, as u r buying a new house!

Great if you don't want to deal with tenants, but then a good property mgr can do just as well in vetting tenants as can DHA with their families.

We had one army family where the police had to be involved, and, so the story goes, the coppers called one night and had to pull the door off it's hinges to get in to the place to get the guy :eek:.....but you wouldn't know it now.:D

So apart from the lesser return, they can be a good buy.
Cheers,
JB
 
Good to know it was a successful experience for you geoffw and bradje. Given the comment about lower returns, how do you rate it as an investment, especially in comparison with other investments you or others have made? Would you buy with them again?

Thanks.
 
Here's the property:

allhomes.com.au/ah/ah0079?rlid=167365664

Belu, the property actually had been let out for some time at a rent rather much lower than I had been receiving. DHA had been subsidising the rent. But now after a good rejuvenation I can get close to the rent which I had been receiving before.

Boods I'm not sure why they did not renew. They originally said that they would, subject to some improvements, but then changed. It doesn't really matter I guess.

Celica the change of heart was probably too short. It didn't matter to me, as it happened, but could have been a little better. I had been asking for written confirmation of intention to renew but did not ever get that. Probably the only unprofessional part of the whole lease.
 
JB the higher management expense is not quite as much of an issue as before given what other PMs are charging now- though it still is an issue. I used to get charged 7% plus GST but now it's 9%.

On my calcs a property let out at $500pw for 12 years costs me an extra $18k over ther term. But I get perhaps $14k in upgrades at the end of the term. And I have not had to pay any maintenance during the term of the lease. I'm sure that I would have had to pay a lot more in maintenance than what I had to pay in excess management fees.
 
Jb I agree with the other minuses though. Especially resale. Which affects revals if you want to draw on equity. You can only sell to investors while the lease is active. However sometimes a bank will take the security of the lease income into account when assessing income. That has happened.
 
Partners one is a big private house in a very good suburb he rents directly to Dept of Housing (not defence) andthey put some poor disadvantaged souls in there andwe all pay for it with taxes. It is through an agent and DH sign a 4 year lease at very good money, (because that evens out over the 4 years) do all repairs and maintenance. They are still saying they want to renew but I dont think they have signed a new contract even now
 
Geoff what did you purchase for , and the vals now? holding for this long would mean cash ++++ so the tennents realy held the time factor , for you yes?
 
A builders perspective...

In about three months we should have our building company accredited under the National housing code and passed the Federal Safety commission audit. This means we should be able to start construction work for Defense Housing.

Currently there is a major back log of houses that need starting however, very few builders have the above accreditation therefore contracts cannot be awarded until builders are accredited.

The biggest drawback in builders achieving accreditation is cost. Hutchinson, recently got accredited and it cost them close to $1m. Therefore, at this stage very few builders are bothering with this accreditation. This means more work for us:D

I view DHA as a developer and a marketer funded by the government. They develop houses to provide accommodation to govt personnel and sell them on to investors with a tenant for a profit.
 
I have just put my DHA property up for sale here in Darwin. It's unfortunate I'm selling it now as its still under lease until 2012 so I am having to offer it below a price that would be achievable if an owner occupier could purchase it. It's up at $727K with a $700pw rent (a 5% yield).

I received photos from the sales agent and was extremely impressed by the condition it is in (12 year old property). It was in great condition when I saw it 3 years ago (when it was 9 years old) and is still just as good as then now. My other IP is in bloody awful condition (same age) in comparison.
 
It is accepted that most tenants will not look after a property the same way they would look after their own home.

Therefore, a regular maintenance schedule is important to keep property in good order. We all service our cars so they run efficiently, an investment property should be treated the same way.

There are a certain amount maintenance that a tenant should be obliged to do however, if you do not provide them with a comprehensive list then they will not know what to do.

Then you have general maintenance that you as the owner needs to do in order to keep the property looking fresh. A good time to do this is when tenants vacate.

Unfortunately most property managers do not have the skills or understanding of educating or recommending such schedules to their owners. You will also find that most property managers are young and inexperienced and may not own a property themselves, yet they are left in charge of millions of dollars worth of property.
 
Last edited by a moderator:
Seems like a lovely way to baby sit i nice capital gain, ;)

Bought mine in 2001 for $320K, now worth $440K. It cost me about $150/week for the first 6 years, so I do not consider that a good investment.
My problem was I bought in Holsworthy (Sydney Western Suburbs) and the capital gains there have not been too good when compared to other parts of Sydney. If I had bought a DHA townhouse at the same time in a southern suburb, I would be about $300K better off!
That was my first IP....So u still need to do your homework and investigate where DHA are selling. U can get good cash flow +ve properties from DHA at Wagga Wagga......Personally I wouldn't touch it, as I have no idea what the population will be doing down there in 12 years time when the lease runs out....Could be good, could be bad.:confused: However in the beach suburbs of Sydney, I have a pretty good idea what the population will be like in 12 years time....Still growing!:)
Cheers,
JB
 
Purchased for $190K, worth around $520K (it was worth $580K about 18 months ago).

Geoffw, why was the property worth more 18 months ago?

I'm looking at a DHA property with 2 years left on the lease. If I can get it at a good price, it would make sense that the value would be much higher when the lease ends when its allowed to be sold to the open market?
what are your thoughts on this?
 
The market had peaked before the GFC, and in that area, had dropped back. Possibly it's gone back again.

As for buying a DHA property towards the end of its lease- it's quite possible you could do well. But, like anything, know your market well.

The repaint/recarpet factor may be built into the sale price.
 
Back
Top