Article supplied by DHA Australia. 22/09/2015
The rising trend for buying an investment property may be because of the steady increase in property values across Australia and their attractive weekly rental prices. Almost 1.9 million Aussies declare rental income to the ATO each year1
so buying an investment property would seem to be as Australian as football, meat pies and kangaroos. However, with the increase in property prices and the number of investment properties available for lease, investors are encouraged to carefully consider all risks before spending their hard-earned savings.
The goals of an investment property
The main goal for an investment property is to make a profit. Starting from getting a rental income as soon as possible to help offset mortgage expenses. The other goal would be to gain capital growth through the increase in property value.
The risks of an investment property
With lenders raising interest rates on investment loans to curb the rate of borrowing, investors will now need to have larger deposits to access some investor loans. The increased vacancy rates in investment properties and the prediction that interest rates may increase over the coming year makes high or guaranteed tenancy rates an attractive option for investors. One such prospect is Defence Housing Australia, a Government Business Enterprise (GBE) that offers a unique property investment opportunity with guaranteed rent*.
The low-risk, minimal hassle, steady return option
DHA property has become popular with investors looking for a low-risk investment option. Investors purchase a property from DHA and lease it back, with standard lease terms of nine to 12 years. Defence members serving in Australia’s Army, Navy, and Air Force, along with their families, then live in these properties. You don’t need to have any connection to Australia’s Defence Force to invest in DHA; while some past or currently serving Defence members have chosen to do this, the majority of investors have no connection at all to the military.
While independently purchased properties are vulnerable to fluctuating demand for rental properties, there is no vacancy risk with your DHA property. Even if the property is without a tenant for a period of time, DHA will still pay the rent while it’s vacant.
With a DHA property, not only is your rental income guaranteed*, you’re also free from most of the responsibility of repairs and maintenance. DHA organises and covers the cost of most non-structural repairs and maintenance and will regularly service heating, air-conditioning and hot water systems; ensure general upkeep of grounds and gardens; and replace fixed appliances—like a stovetop—as required.
DHA has independent valuers review rent amounts every year, with adjustments made to market value, but never falling below the commencing rent for the term of the lease. At the end of the lease, DHA typically organises professional cleaning to ensure the property is returned in good working order, with the carpets cleaned, internal and external painting, and appliances in good working condition, subject to the terms and conditions of the lease. This means that at the end of the lease you can decide to move in, rent privately or sell as you wish.
As with any investment decision, be sure to get independent financial advice to make sure you make the best decision to suit your specific needs.
Learn more about investing with Defence Housing Australia
or enquire online
*Rent is subject to abatement under limited circumstances.
Investment is subject to DHA’s lease terms and conditions. Investors retain some responsibilities and risks, including property market fluctuations. The advice contained in this article is for general information only and prospective investors should seek independent advice.
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
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