Defence Housing (revisited)

[geoffw]

From: Geoff Whitfield


My apologies for posting this as a new topic. There have been numerous threads about Defence Housing before- but this is a new slant which may get lost if I replied to a retired (or tired) thread.

I have a 3-BR property in Canberra (my first IP from 4 years ago).

The living area is huge. It was already big before the previous owner converted a 2-car garage to even more living space. The tenant suggested to me, when I bought it, that the living area was too big, and that he had to buy more furniture just to fill the space.

So, my brainwave (duh, very slow- 4 years later). But now I can see that I could increase the equity by some reasonable amount by converting the ex-garage to a bedroom, without incurring a huge cost. Owner happy, tenant happy.

DHA not happy.

The house is classed according to tenants' needs according to criteria such as bedrooms, living space, separate family/lounge areas etc.

If I closed a little of the surplus living, then that changes the classification. So the tenant (same tenant for 4 years) may not be qualified for the house. Over or under qualified- it could be either. For instance, with a 3BR house, an en suite lifts the place from "B" to "C" rating (which is better). But for a 4BR, an ensuite is a necessity rather than a luxury. So that may downgrade the grading- and force DHA to down the rent. Or upgrade- who knows? They can't tell me.

Just a warning for any who may see potential to improve a DHA property.

 

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Reply: 1
From: Jason Kidd


Hi Geoff,

Was just looking into DHA the other day. Love the prospect of 9ys+3 lease, but the management fees (in the mid teens) are a little scary. Also, from what Ive seen, the owner has little say in the rent, as well as any future increases. Have you found this to be the case in your 4 years of dealing with the DHA? The prospects seem good as a long term investment, but all the locations of available properties (on the DHA website) have experienced minimal capital growth over the past few years. Thanks for any help.

Much appreciated,

Jason

 

[geoffw]

Reply: 1.1
From: Geoff Whitfield


Jason,

Rent has increased over the 4 years, though I did feel that the $10K I spent in landscaping etc might have been taken into account at rent review time.

Management fees do take into account some maintenance. I've not had to spend anything in maintenance. They've fixed a leaking roof, put in a deadlock, and done lawn repairs. There's no doubt there's other things I don't know about. But that still turns out to be expensive maintenance.

They can turn out to be in low growth areas- but that might just be their preference for newer properties, which are more often in developing areas with lots of land. There are a few properties in established areas though. The rental yield might be lower.

I was OK with a DHA property when I was at that stage. I wouldn't do it again now though.

 

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Reply: 2
From: Andrew S


Hi Geoff,

Just a thought, and it does depend a bit on the layout. Is there an easy way that you could make it more of a multi-purpose room, such that DHA would still classify it as living area, but the tenant could more easily use it as a bedroom if that's what they want?

I also looked into DHA but felt that it takes away some of the control and flexibility that I was looking for.

Mr Jolly

 

[geoffw]

Reply: 2.1
From: Geoff Whitfield


Mr Jolly,

Thank you for that.

The layout does lead itself to making the extra room into a study. So if I add shelves and a desk, that may suit them. But I might have to wait until change of tenant though- and the present tenant has been there four years already.

My post was not so much seeking a solution, but pointing out, as you have found, that you do lose control to some extent with DHA.

Geoff