Is Defence Housing a Good Investment?
Dilleen Property Group 2022
Defence Housing Australia (DHA) is a government business designed to provide suitable housing and services to Australian Defence Force members and their families.
Eddie has personally not bought defence housing as an investment property, however, he is commonly asked on whether he believes these properties are a good investment. Below are three key points that Eddie has noticed with defence housing.
Prices
The price of DHA properties are usually higher than the properties you would usually see on the market in Eddie’s opinion. It is usually above the median housing price. If you are purchasing a property above the median price, then there is a higher chance that the property will have a lower rental yield. Eddie personally prefers to buy below market value and comparable sales as this is a strategy that will allow you to gain equity on your way in.
Risk Factor
When you look at buying investment properties and growing a large property portfolio, risk factor is a component that you should always consider. If you want to sell a property or if you need to sell a property, it is important to consider how quick you can sell the property. Usually, it is a lot harder to sell investment properties that are not everyday residential properties. They can sit on the market for an extra 2 to 6 months. If you think of defence housing, the only people that can buy it is investors. This takes away from half of the market. In Eddie’s opinion the risk factor is a lot higher for defence housing investments.
Cash Flow
A positive of defence housing is that they will often guarantee rental income for 5 or 6 years. However, in Eddie’s experience many people will throw around the word guarantee when purchasing a brand new property, but it isn’t always the case.
It is important to have cash flow properties as this will allow you to not get stuck with finance when investing. This is why high yields is a must when purchasing investment properties as you wont max out on your borrowing capacity.
No matter what property you buy, always make sure that it fits the 3 important criteria’s: below market value, high rental yields, and locations with strong indicators of capital growth.
Disclaimer: This is not intended as legal, financial, or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature, you should seek advice from a qualified and registered legal practitioner or financial or investment adviser.
