DHA Rent

From: Greg Loucos


While investigating DHA properties I have come up with an issue which the forum may be able to clarify.

The rents set out on the DHA properties documents appear to be much higher than the rents available from non DHA sources.

I have checked with various Real Estate Agents and for example a 3 bedroom home would be privately listed with a rent of $220 while a DHA property in the same area has a rent of $300.

From my previous post it was stated that the rents for DHA properties are revised yearly and on receiving the lease agreement this is certainly the case.

My questions are

1 Has any forum member had the rents of their DHA properties revised downwards at the yearly review?
And by how much?
Who decides the size of the variation?

2 Is this initial rent the carrot to entice you to buy?

Regards

Greg
 
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Reply: 1
From: Jeremy Laws


Easy,
DHA properties are sold to the public at an higher price then non DHA. Thus the rental return is 'sold' to the public. Great idea! I would be happy to sell you a property for 30k above market (nice blinds and guaranteed tenancy included) and guarantee you a good rental. I'll give you a better deal on a better property - pls contact me if you are interested. I will give you an honest appraisal but I do have a property that would suit. I await your email.
 
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Reply: 2
From: Diane -


Hi Greg,
I have heard Darwin rents were revised down by 30% (hear say only). As I have said before do not take DHA to be any more than a property developer and manager out to make a dollar. Do your research and work out your figures based on the real rental market for the area you are interested in.
Best of Luck
Diane
 
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Reply: 3
From: John P


And here's another downer Greg, as I understand it, because THEY have to manage the property (being DHA) they charge an average of 16-17.5% commission!!!! (I know this because I rec'd the info pack about 3 days ago). So my point is, even if the properties were not over-priced to begin with even with the apparent higher rental returns you supposedly get, it would be eaten away by these excessive commissions.

That's just my 10 cents worth


John
 
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Reply: 3.1
From: Geoff Whitfield


The commission is high- but I've had good experience on that side.

On a few occasions, I've had calls like "The tenant has asked for a deadlock. That's OK with us- we're going to pay- but is it OK with you?".

The tenant has also told me that they have fixed leaking roof tiles and repaired subsequent damage- and even fixed up lawn not done properly by my landscaper. DHA did not tell me about those improvements- probably bad management on their part.

The negatives have been, where I purchased, low capital growth and barely positive cashflow- but there is security. It depends what you want.
 
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Reply: 3.1.1
From: Greg Loucos


Thanks to all for the responses.

Jeremy thanks for the offer.

Diane 30% variation raises hairs on the back of my neck, are your sources reliable?

John thanks but knew management fees were high was looking at a safe first IP if there is such a beast!

Geoff sounds as if your first IP was a DHA property, have you ever had the rent revised downward? Who determines the variation is it CPI based or market driven?

The properties I have looked at compare favourably with the private market in price although on the higher side of prices asked, approx. 5k higher for the same area and features.

On another note has everyone else found it hard to make the leap of faith into buying the first IP seems like everytime I have questions all I end up with are answers and more questions can you be to cautious!

Regards

Greg
 
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Reply: 3.1.1.1
From: Geoff Whitfield


Greg,

So far (4 rent reviews later) the rent has gone up. But so has the market rent in the area. The rent review is performed annually by an independent appraiser. In the last 2 years, it's been 6-7%- a little more than previous years. But the rent is only just now cash flow positive (just).

If you choose your property well, it's got more chance of going up than down. Buy in an area where there is a general demand- not just defence. Don't buy where there's plenty of land still available- capital growth may suffer. And look at all the other criteria you'll find in the forum.

Another downside. We had our property (Canberra) valued by a real estate agent. $220K as a DHA property- $230K if for vacant sale. It's in an area where people want to live, not invest.
 
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Reply: 4
From: Joo Joo


Hi Greg,

my first and only IP is a DHA, there are a lot of things which you guys are missing. If you do a search under DHA you will find a very useful discussion posted about 2 months ago.

joojoo
 
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Reply: 5
From: Terry Avery


DHA are currently into iteration D of their leases. If you read the
current lease on offer they set the rent for the first 12 months and
then review the rent. If rents have dropped then they will maintain the
rent for a further 12 months but no mention of what will happen after
that. Presumably they revert to market rates and hence will drop. If you
are paying over market value for the IP and receiving higher than market
rent then you can be assured of that rent for at least two years. Each
property has to be assessed on its own merits.

A further point in the lease is that they have increased their
commission from 15% to 16.5% to cover GST. However given that rents are
not GST taxable and only the agent's commission and repairs are taxable
events they are getting a generous markup. Can anyone more knowledgeable
comment on this (Dale perhaps?).

Cheers

Terry
 
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