If you just read the rental market update, you’ll probably think that buying an investment property right now has to be the absolute worst idea.

 

Can I suggest you consider the following if you want to make the best property investment?

 

We come across a number of Defence Housing Australia properties that are midway through their lease terms. DHA recommend us to their clients who want to sell their property before their lease is up. The leases typically have between 3 years and 10 years to run with DHA paying rent month in month out. DHA charge a fairly heavy management fee of 15% which is a downer but that fee also covers the cost of some maintenance on the property.

The point is that often these properties come on the market at a discounted sale price as compared to similar property of a similar age. The discount reflects the locked in lease because the property can’t be owner occupied until the lease is up. That said though, the rents are externally valued each year and adjusted and with no vacancy or surprise maintenance cost so if you are looking for an investment property for at least as long as the lease has to run, there is a lot of upside.

Firstly the rate of return even with the management fee taken out is pretty attractive. A townhouse we have for sale in Dundas is showing a 4.32% gross rate of return. Generally property in the area would be lucky to achieve 3.5%. If you minus the Defence Housing Australia management fee the property still shows a 3.67% return and that’s without vacancy, management or repairs to worry about.

Secondly, and this is the best bit, when the lease expires in 8 years’ time, the value of the property returns to the same value as a property that is able to be owner occupied. The Dundas property is on the market for $890,000. A very similar aged and designed property recently sold for $950,000. That’s the size of the discount for a fixed lease. But it’s also the size of the potential jump in value once the lease finishes.

In an investment market that is looking decidedly challenging, this is a buy that you should really consider. No headaches, wait out the market and make extra capital gain. This is the best property investment decision you can make.

If you’d like to know more, please contact Elisma on 0422 462 010 or email liz@jacksonrowe.com.au – she is a Defence Housing Australia expert!

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