DHA management fees

Hi All,

Now before this gets shot down, let's assume all things as an investment property tick the box regardless of being either a DHA house or non-DHA house.

My question is - Are the 16.5% that DHA charge to manage a property that unreasonable taking note that there are nil vacancies, nil re-leases, new tenants, maintenance taken care of, etc.

In the last 6 months I have had a vacant unit for 3 weeks then had to pay the standard RE costs - first weeks rent, lease fees, and so on.
Also had a house vacant for 10 days, had to pay lawn mowing, first weeks rent, letting fees, and so on.

So if tenants are changing each 2 years on average, by my calculations the DHA arrangement stacks up OK. What am I missing? Would love to hear from people with experience having had a DHA house previously or still have one.
Looking at the security of a long term arrangement at the current low interest rates............

Thanks for any feedback
 
Depending upon the area that the property is located it can be attractive providing you aren't paying a premium to buy it. As you said, you're paying 16.5% (incl/excl gst).

For that, you are getting zero vacancy over 10 years possibly more - how many others can say that? The tenant (DHA) will paint/carpet/maintain etc (is it at your cost?) Water service charges (are these paid by DHA)? These aren't part of a normal tenancy agreement so can be more attractive to an investor.

However, you will have to trade off the ease of sale if you want to exit the investment prior to the expiry of the lease.
 
Hi All,

Now before this gets shot down, let's assume all things as an investment property tick the box regardless of being either a DHA house or non-DHA house.

My question is - Are the 16.5% that DHA charge to manage a property that unreasonable taking note that there are nil vacancies, nil re-leases, new tenants, maintenance taken care of, etc.

In the last 6 months I have had a vacant unit for 3 weeks then had to pay the standard RE costs - first weeks rent, lease fees, and so on.
Also had a house vacant for 10 days, had to pay lawn mowing, first weeks rent, letting fees, and so on.

So if tenants are changing each 2 years on average, by my calculations the DHA arrangement stacks up OK. What am I missing? Would love to hear from people with experience having had a DHA house previously or still have one.
Looking at the security of a long term arrangement at the current low interest rates............

Thanks for any feedback

I always thought 16.5% is high but if you consider you receive 52 weeks rent and they replace carpet and repaint that's actually decent.

as long as the 16.5% is total cost I think its okay

(I don't own any DHA properties)
 
Yes the 16.5% PM fee is basically double the PM open market fees but that is how they are funding the cosmetic refurb at lease end. You have already indirectly paid for it along the way.

If you want peace of mind knowing you have secure tenancy for 10+ years and you're happy your purchasing a IP at the going market rate of the time - couple that with the property is likely to attain what it is you are looking for it to do, then its seriously worth the view to purchase.
 
The investment needs to stand on its own as sometimes they are overpriced relative to the market IMO.
These properties are often marketed to new investors who are unsure or nervous about taking a chance and as such they are advertised as a safe investment. The management fees are high but this comes with no vacancies and a freshen up at the end of the agreement.
I have looked at a few and they tend to carry a premium price tag, if you have found one at market value then it might be worth considering.
 
Great, thanks for all the feedback thus far. Back of the envelope calculations with my property vacant for 3 weeks plus an additional week where no rent is received because the REA gets the first week of a new tenant, that's about $1,600. The additional 8% or so that DHA charge to manage is covered for 1 year if this makes sense. $30 extra each week management cost x 52 weeks equals $1,560.

Really appreciate the input of the great minds of those who have looked at these previously.
Thank-you
 
Well on very basic numbers on say a $400 per week property (and excluding GST for simplicity). Allowing 2 weeks vacancy per year for non DHA and zero vacancy for DHA

Standard management:
Total rent = $400 x 50 x 10 = $200,000
Management outgoings =
8% x 400 x 50 weeks x 10 years = $16,000
Letting 1 x $400 x 10 = $4,000
Net return = $180,000

DHA
Total rent = $400 x 52 x 10 = $208,000
Management outgoings =
16.5% x 400 x 52 x 10 = $34,320
Net return = $173,680

I think it's unlikely that a well bought property would be vacant for 2 weeks every year and you would have to pay a letting fee so the "standard management" is conservative in my opinion. You might not be paying 8% either. Even if that were the case, you can see you're paying for your own refurbishment and you have less freedom on where and what to invest in.

I'm generally of the opinion that people can do better. DHA just requires less input from the investor and therefore suits some people better. You are definitely paying more for it though.
 
I'm generally of the opinion that people can do better. DHA just requires less input from the investor and therefore suits some people better. You are definitely paying more for it though.

I agree with MyPropertyPro - and I do think they can be priced at a premium considering there is a restricted market.

One positive point to note is that they do guarantee that rent won't go down - this would have been attractive in the Canberra market of late. But this is only short term thing in general. The flip side is that your increases are at their discretion - if you search, you may need to stay on top of this.

I think the cosmetic reno thing is a bit overblown - basic carpet and paint - nice but it doesn't cover everything. The comparable after tax cost of this may not even be that much.
 
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