Definitely talk to a financial advisor. We are in economically uncertain times at the moment - it'll probably be a bit rocky for the next 2-4 years before things stabilise. You need to think about things like - whether a ppty bought at this time will *really* hold its value in a shrinking economy, whether the tenants are going to be able to sustain paying the amount you are thinking of (and whether you can "wear" several months of a tenant defaulting on their rent, or several months of ppty vacancy - which can happen), and also you need to factor in the costs associated with maintaining a ppty over a period of time - everything from replacing water heaters to fixing fences and repainting etc as the ppty ages.
Another thing to think about is - the possibility of purchasing an ex-govvie house (from Defence Housing Authority or similar). They have ppties for sale with a set lease-back period, it means your income over that time is guaranteed and they also maintain the ppty to a higher standard before handing it back to you than in the average rental scenario where you pay for everything.
We are a defence family and I wouldn't recommend buying a DHA (Defence Housing Authority) investment property until you can financially afford to pay more than the property is worth. The bold sections are from the DHA website.
DHA properties are significantly more expensive than private homes. This is because DHA work out the market value of the property and then add on to that their own overheads, what they could be expected to pay in rent if the property is vacant and also any end of lease provisions such as repainting or recarpeting. Even though it sounds good that you get these things done at the end of the lease, your actually paying for them upfront in the sale price. DHA homes are sold on a fixed price, so you can't negotiate the sale price. New policies now also state that you must be the lease holder for more than 6 years for DHA to repaint your property. While they will do general maitanence to the property and replace faulty appliances your still responsible as the owner for the majority of repairs which includes anything which can be claimed on insurance. Your also responsible for upgrading the property to meet DHA tenant expectations.
We currently pay 8% for our management fee with a private real estate agent which is also negotionable. DHA currently charge 16.5% management fee. For our 8% our properties are inspected every 3 months, DHA only inspects once every 12 months & it's a myth that all defence families are good tenants. It's just like the normal rental market some tenants are better than others. DHA quite frequently place families with 4 children in a 3 bedroom house and also allow families to have pets of any kind. Just because a family is employed by the defence force doesn't make them a more considerate or better tenant that someone outside of the ADF (I've seen many a DHA house trashed).
As a defence family and having lived in quite a few DHA houses you don't get your money's worth out of a DHA lease.
If you purchase a DHA property that has a lease in place for say 3 years for example and you pay $50,000 more than the market value just to have a DHA investment property and at the end of that 3 years DHA decide to not renew the lease then because it's less than 6 yrs they won't repaint it (the property has to be leased for a minimum of 6 years before they will repaint it), so your up for these costs before you can place the property on the private rental market.
If you decide to sell, the property will now only be worth market value and if the suburb hasn't increased in price, you may end up selling for a loss because you paid that extra $50,000 for the DHA lease.
I hope this makes sense.
How is the sale price calculated?
The sale price of properties is calculated based on an independent market valuation, and takes into account DHA overheads, end of lease provisions, and above all, the value provided by the DHA lease.
Is the sale price negotiable?
No, the sale price of DHA properties is fixed.
[B]What management and maintenance fees will I have to pay?
DHA charges you a single fee to cover the cost of property management and most day-to-day maintenance.
The management/maintenance fee varies depending on the type of property.
DHA currently charges:
16.5 per cent (inclusive of GST) of the gross rent for houses, or
Between 12 and 14 per cent (inclusive of GST) of the gross rent for apartments, units, and most townhouses where a body corporate or similar entity is responsible for exterior maintenance.
The management/maintenance fee is fixed for the term of the lease, and is deducted from the rent paid to you each month. [/B]
What repairs and maintenance costs will I be responsible for?
The DHA lease excludes a number of items from DHA?s maintenance responsibility, including:
.repair of structural defects and damage
.major landscaping such as tree removal and fence replacement
.work which is subject to a warranty
.work which is the responsibility of a third party (eg body corporate or similar entity), and
.work which is covered by insurance that you are required to have.
.In the event of an insurance claim you would be responsible for the cost of any excess that applies to claims under your policy.
Reply With Quote
Bookmarks