Enoggera and DOHAS?

[MLink]

Hi everyone,

So I'm hoping there are a few people here on the forums that might be able to help out a very confused and frustrated property newbie?

My husband is in the Army and we current live in a Defence rental in Brisbane. We have one investment property in Chermside due to our PPOR being transferred to an IP after posting away and not living in it. (We purchased in 2007 - so almost no capital growth to date)

We are now considering getting a Defence Loan where we get between $300 - $400 per month towards our mortgage if we purchase the home in our current posting locality, and live there for 12 months. We can then move to another posting and still continue to receive the benefits for 20 years (I think?), and at that time we can also move back into a Defence Rental and receive subsided rent. (So double hit of benefits I'm thinking?) Eventually would love to come back to Brisbane (my home)

My issue is that we have two small children both in daycare and moving into the local school next year. My husband is being posted to Canberra in Jan-2014. I'm considering the option of purchasing a home now here in Brisbane now, in close proximity to my children's school and my work, however due to the DOHAS requirements I'll have to stay for 12 months, while my husband only has 7 months here in Brisbane before he moves. (He can live on base in Canberra) So we could go 'married separated' in terms of the army next year. (My job here in Brisbane is another consideration into going married separated)

So I'm looking at property options in the Enoggera area - and I've found a property that I think would suit our family in the short term (trying not to get emotionally attached) however I think we would have to pay $540k for a 3 bedroom house close to Enoggera. We can easily service the mortgage repayments as we both work full time (for now). It is currently being rented at $450 / week. Straight away I'm thinking that the rental return is too low. (Add into the mix in 2015 or 2016 I'd like to stop work for 12 months to have another child - so being able to make the mortgage repayments during that time is a big consideration)

But I've been told that the potential capital growth in this area makes this property something to consider?

I'm wondering if we should look further away from the city to get something with better rental return, however if my husband leaves to live in Canberra I'll potentially be a single full time working Mum for a period of time and the extra travel time to and from work and daycare-school drop off would be a struggle. (And the traffic is bad enough this close to the city!!!)

Or perhaps we should just forget about buying in Brisbane, and just buy something in Canberra in 1-2 years to avoid all this drama.(Depending on current baby status of course) Or even still - just buy an Investment Property somewhere outside of our posting location (Defence requirement or else we have to live in it)

So apologies for the big rambles... But if you've reached the end of this and still willing to offer some thoughts, I guess the big question is, 3 bedroom house in Enoggera area for $540k with $450 rental return - hit, or miss? (Should have just said that at the beginning I guess!)

Thanks!

 

[Sam Yue]

MLink, I just bought a house in Enoggera for 505K a couple of month ago and rented it for $420. That is around the average rental yield in this suburb. I think it's a good idea to buy home in Enoggera:

1. save your travel time as your home
2. it is a good area, the high land value causes the house price high. It's the land value, which will have the best capital gain and no maintenace fee (if you don't need to pay land tax).

If you buy a cheaper but high rental yield property, most likely you will buy a property with low land value but high building value. Lower land value means worse location. Over years the building will get older but the land value will not grow as fast as the high land value property.

Enogger has rail station and only 7km to CBD, it is a quite safe option to buy property there. Of course, there will be better place to invest, but it is not easy for new investor to find out.

 

[MLink]

Cheers, thanks Sam Yue.

 

[Bantam Roosta]

MLink,

Does you husband already have his formal posting order? If he has, it is unlikely he will be able to get access to DHOAS in your current locality. Going married-unaccompanied my not be enough.

If you have received a posting order and know you will be relocating within a year then you cannot access DHOAS. The reason is that you cannot comply with a condition of the legislation, which is to occupy the home for 12 months from the time you start receiving the DHOAS subsidy.

If he has only been given verbal orders, it is possible that you could buy the house before his formal orders come out, but his posting authority would have to confirm that he was likely going to be in location for another 12 months, which they would be unlikely to do if they know they are about to post him. This would also be defeated the 'good faith' test.

If you receive a posting after moving into a DHOAS subsidised property in good faith that you would have stayed for 12 months, then your DHOAS subsidy assistance can continue even though you will relocate and no longer live in the home.

If you were to buy under the DHOAS scheme, the house will be classified as a suitable home for all future postings to the same location, unless the number of dependants changes, which it sounds like you are planning on doing, which will change your entitlements. See PACMAN 7.2.6 3.

Another issue to keep in mind. DHOAS is FBT reportable. The value of the benefit will be included in your husband's income for any centrelink/family assistance payments. See the DHOAS site for details. Probably not an issue on your current combined income, but will affect you if you decide to stop work for a while.

Also, you can now buy an IP in your current location as long the bedroom entitlement is less than your entitlement. In your case, depending on the age and sex of your children, your entitlement will be 2 or 3 bedrooms. If you have a 3 bedroom entitlement, you could invest in anything with 2 bedrooms or less and not have to live in it. See PACMAN 7.2.4-9 to see details yourself.

None of this answers your big question, but hopefully it helps your thought process.

BR

 

[MLink]

Thanks for all that! I'll go read up on it all now.

At the moment he has only had verbal posting orders, and given that I have a great job here in Brisbane that I don't want to leave, we thought that going married separated in 2015 in the short time might be a solution. I'll have to find out if this fits in with the good faith criteria or not.

If not, then yes perhaps looking at an Investment in Brisbane with fewer rooms than our current entitlement might be the way to go. (And also a more affordable option that wouldn't create as big a financial burden if our income reduces to just one!)

 

[Roachy]

Thanks for all that! I'll go read up on it all now.

At the moment he has only had verbal posting orders, and given that I have a great job here in Brisbane that I don't want to leave, we thought that going married separated in 2015 in the short time might be a solution. I'll have to find out if this fits in with the good faith criteria or not.

If not, then yes perhaps looking at an Investment in Brisbane with fewer rooms than our current entitlement might be the way to go. (And also a more affordable option that wouldn't create as big a financial burden if our income reduces to just one!)

I'd look at investing somewhere your husband won't post. Perhaps Toowoomba (depending on Corps), if SE QLD is somewhere you like. Or perhaps Adelaide, Melbourne or Sydney (depending on rank and Corps).

We have the same dilemma as you and are looking at buying a property with development as well as renovation potential, allowing us to improve yield and CG. Perhaps some food for thought.

 

[MLink]

Thanks Roachy, actually today we decided against purchasing the property at Enoggera, and are changing our strategy and will be looking for an investment property instead.

We will just continue to rent for now, and as we don't have much deposit, the extra LMI that we would have had to pay outweighs the DOHAS benefits in the short term.

Hopefully in a few years we will return to Brisbane, so we might hold off our DOHAS plans until we return.

Now.....the next stage begins....researching where to invest!!

 

[Icarus]

What about moving 2-3kms west and looking at Arana Hills or Keperra? (Only 5min extra, not much in the scheme of things).

Low to mid 400's will buy you something getting $450+pw and if you can make the most out of the Defense $, why wouldn't you?

Still a bit of upward movement left in these suburbs I'm betting.