Defence Housing

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From: Mike .


Defence Housing
From: michael
Date: 11/2/99
Time: 9:53:29 AM

I am new to this investment scene and am looking at my first investment property. Hope some of the more experienced people on this list can help.

I read an earier post regarding the 15% fee Defence Housing charges and this doesn't look too bad when I do my sums. Please correct me if I am missing something.

For ease of figures lets assume rent is $300pw. Fee wold be $45. Most Real estates charge one weeks rent and then 7%. This leaves 8% extra to pay, now lets take 2% for vancies,back to 6%. I don't need tenant insurance as Defence Housing will repair all damage under this maintenence scheme and continue to pay me rent. Lets say another 1% off bringing it back to 5%.

So I am paying 5% per year for worry free maintenence and a complete repaint and new carpet after 9 years. So what am I missing?

 

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Gee Cee

Reply: 1
From: Mike .


Re: Defence Housing
From: Gee Cee
Date: 12/30/99
Time: 7:14:54 PM

Be really careful that the home is not overpriced compared to other properties selling in the area.?

What is the demand for similar properties and supply available now and coming on line in the future?

There was a story in one of the Sydney Sunday papers recently (Nov or Dec) about a guy that bought an over inflated priced place in Townsville from the Defence Housing Dept.

They pulled out of the lease and paid a few months rental to compensate.

The guy is now stuck with a place that rents for less $ p/w and cannot even sell for anywhere near what he paid!

Did anyone else see the article? If so could they notify me what date & paper it appeared in.


Also I have heard of cases where say the rental guarantee is $300 p/w and they pull out when they can put any Tom, Dick or Harry in to rent the property @ say $150 and just make up the $150 difference.

Anyone else heard of this?

 

[WebBoard]

Sue1

Reply: 1.1
From: Mike .


Re: Defence Housing
From: Sue1
Date: 11/21/99
Time: 12:36:55 PM

Hi Michael,

Well having listened to everyones thoughts on Defence Housing I have to admit that the figures sound a bit better when looked at more closely. I am still concerned about the "higher purchase price" (which may not be so noticeable in Sydney, but is definitely a factor in smaller regional cities) and rather than just believing the sales person about the "independent valuation" I would invest $170 in my own "independent valuation". If it comes up OK then it sounds like overall it's a pretty low risk investment.

As far as areas go they seem to offer houses in mostly up and coming sought after areas (not necessarily tied to a base) so I don't think getting civilian tenants afterwards would be a problem. Let us know how you go.

 

[WebBoard]

Les

Reply: 1.1.1
From: Mike .


Re: Defence Housing
From: Les
Date: 11/2/99
Time: 12:15:16 PM

G'day Michael,

An interesting point. I can't provide specialist knowledge as I've never owned one. But your figures looked pretty good to me.

In comparing the figures to "ordinary" rental houses, the figure of 15% appears reasonable. Given that an "ordinary" rental would be overdue for paint/carpet in 9 years, and allowing $2000 for each, this seems to come to 3% on its own. Add that to normal RE costs (including an assumption of 1 week's rent, and maybe 2 week's vacancy every 2 years), that's another 2% added to the 7% - 8% that RE agents charge. Insurance is 2% (building, contents, as well as tenant). That comes to 15% right there.

Many (Jan included) recommend 25% allowance to cover all of these plus maintenance (especially on older properties - maintenance shouldn't be that much on a new property).

Does the Defence Dept include ALL maintenance costs in that 15%, or just tenant damage? If it includes all, then it sounds to me like 15% is really pretty sweet.

So what ARE you missing?

From Sue's words earlier, perhaps an over-inflated purchase price? The $20,000 figure she mentioned adds 7.5% to your 15% - based on your $300 / week figure. If less rent, then % is higher, of course.

How about the area where the properties are located? Is there a secondary market (to civilians) after the 9 years is up? Or does the proximity to military bases dictate that renting to civilians is unlikely? Would the Defence Dept. continue the arrangement PAST the 9 year mark?

And if this proximity to a base is NOT an issue, then the normal "rental" questions still apply - e.g. is the area one where there is a low vacancy rate? Is the house liable to continue to receive the $300 per week that the Def. Dept. has been paying, or is this fgure over-inflated? Is the area one where Capital growth is average or above average - you certainly don't want BELOW average.

Hope that helps you with your decision. And let me re-iterate Sue's words to an earlier person - something like "If the deal helps to get you INTO Real Estate, then go for it". I'm with her.

Good luck, Les

 

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Michael

Reply: 1.1.1.1
From: Mike .


Re: Defence Housing
From: Michael
Date: 11/2/99
Time: 6:44:46 PM

Hi Les,

Thanks for the input/advice. I need to get the contract checked by a lawyer but the contact person I spoke to for Defence Housing claimed it covered all maintenence and upkeep. So it does appear to be a good deal.

Yes I did see Sue's post about the inflated purchase prices and although they are in the upper range for their areas (I can only speak for the Sydney region), I cannot see $20000 over market prices. I have been led to believe that they are valued by a independant valuer. Sorry, I am now sounding like the sales person I spoke to.

Thanks Michael

P.S Anyone looked at Darwin re growth and demand for investment.

 

[WebBoard]

E Morris

Reply: 1.1.1.1.1
From: Mike .


Re: Defence Housing
From: [email protected]
Date: 4/2/00
Time: 10:04:49 AM

Hi Michael. I am about to buy at Defence H property in South Australia costing 97500 and rented @ 150 pw with a 6 year lease (it had a 3 year option but I wanted to be able to take possession after 6 yrs). I will be buying without seeing which is not really advisable. Ive seen a plan and a photo of the outside..it was built in 94. Defence will also provide (no cost I think) a depreciation schedule (which saves approx 350$) so it appears ok. This is my second property and am now planning a third. any comments??