Pros and cons of defence housing

PROS

Long-term leases (anywhere between three to 12 years, depending on the type of property), which generally means long-term tenants.

Reliable rental income. Rent is paid monthly to the investor in advance. It’s also paid if the property isn’t occupied during the lease term.

Property management is mostly taken care of through a DHA care service. For a flat fee of 16.5% (deducted from the rent and 13% if a body corporate is involved) you don’t have to find new tenants; you don’t have to carry out property inspections (you will receive inspection reports); and if the home is unoccupied DHA will maintain the gardens and lawns.

DHA will cover the cost of most non-structural repairs.

Independent evaluations are undertaken each year by a licensed valuer with a recommendation to increase, decrease or maintain the level of rent.

CONS

The property management fee is about twice what you would pay a regular property manager (anywhere between 4% and 10%).

DHA properties are always sold at market value. The price is fixed and non-negotiable, meaning you’re not necessarily going to get the maximum value if you sell mid-lease. And you can’t negotiate lower when you buy.

Long-term leases (and tenants) can be a hindrance if you need to sell mid-lease. It can also limit possible buyers.

Properties are usually limited to certain locations that are closer to defence bases.

Lease agreements include a variable extension period, which is used at DHA’s discretion and can add another three years to the lease.

You will be responsible for outgoing costs such as council and water rates (usage reimbursed), strata rates, land tax, insurance, termite inspections and some repairs and maintenance.