DHA Home Loan

Looking for a great investment opportunity?

Defence Housing Australia (DHA) properties have become popular with investors who want guaranteed rental income and no tenanting obligations.

However, securing a loan to purchase a defence property can be difficult.

Not all banks will take your rental income into account but we know some that favour DHA housing.

How Do You Buy A Defence Housing Australia Property?

If you are an investor who wants to purchase a DHA property, there are generally two options available to you:

• Buying a property subject to a DHA lease: from an investor who owns a property subject to a DHA lease agreement.
• Buying a property from DHA: the property will be sold by DHA subject to a lease back agreement.

How Much Can You Borrow For A DHA Property?

• Borrowing 95% of the property value: investors purchasing a DHA property can apply for a home loan for up to 95% of the property value. You can also borrow additional funds to pay for Lenders Mortgage Insurance (LMI) to a maximum of 97% of the purchase price.
• 90% no LMI: Waived LMI available with some of our lenders when borrowing up to 90% and buying a DHA property as an investment.
• Borrowing 100% of the property value: WIth a guarantor, you can borrow up to 100% of the property value plus the costs of completing the purchase.
• 100% of your rental income less management fees: we know banks that can include 100% of rent less any management fees (normally 16.5%). This means that some banks can accept 83.5% of your rent.

Not every lender can help! Investors typically call us after having spoken to several banks, only to find out that DHA properties are not an acceptable security type.

Please enquire online or contact us on 1300 889 743 to speak to one of our mortgage brokers.

What Are DHA Purchase Requirements?

If you are buying property off DHA you will be required to provide evidence of your ability to finance the purchase. This may include a home loan pre-approval letter or proof of your cash, assets or superannuation assets.

It is also recommended that you speak to a consultant at Defence Housing Australia who can help you select a property that will meet your investment goals and you can reasonably afford.

Please note that DHA does not allow inspections of the property until the holding deposit has been paid.

How Long Are DHA Lease Agreements?

DHA properties are generally subject to long leasing arrangements of 9 or 12 years. Shorter leases of 3 or 6 years can be negotiated with DHA in some circumstances.

In New South Wales, leases over 3 years are to be registered on the title, however this requirement varies from state to state.

What Are The Benefits Of Investing In DHA Properties?

Owning a conventional investment property can present many challenges and costs.

With a DHA property, most of these obligations are removed.

The advantages include:

• Rental guarantee: There is a government-backed rental guarantee by the Department of Defence and paid every month in advance, regardless of whether there are tenants in occupation.
• Valuation-linked rent: DHA doesn’t fix the weekly rent for the lease period but, instead, the rent is adjusted annually in line with a market valuation.
• Rental floor: Rent will never fall below the commencing rate (only applies to properties leased under DHA’ Lease Edition 6C).
• Tenant guarantee: The DHA will ensure that there is always tenants in your property and that they are of good quality and will keep the place in good condition.
• Restoration provisions in the lease: The property will be maintained, repaired and restored to its original condition at the end of the lease, including all fixtures removed.
• DHA property care services: This includes extensive property inspections, emergency repair services and general maintenance.
• Long lease terms: 3, 6, 9 or 12 years with further options to renew.
• Annual rent review: rent is reviewed on a yearly basis by independent valuers.
• The property is managed by experts: Every DHA property is managed by a person who has experience in property management with annual reviews undertaken by external valuers on 31 December.
• Flexibility with leasing arrangements: the lease can be extended for up to 36 months or reduced by up to 12 months, upon negotiation.

What Are The Downsides Of DHA Properties?

Inflated prices

This is largely an urban myth perpetuated by some investors.

The fact is that when selling properties, DHA selling agents are required to get an independent valuation of the property.

If the valuation comes back strong and they can sell the property to recoup their costs, they will.

If the valuation comes in short, the DHA will typically put the property back into their investment portfolio and hold onto it until market conditions improve.

Rent and capital growth isn’t as strong

The reality of DHA properties is that they don’t reap the benefits of highly-speculative investing.

Properties are instead sold at market value.

However, you should consider the fact that you’re buying a property at a lower price, saving potentially tens of thousands of dollars in upfront costs.

What Are DHA Management Fees And Costs?

Property management fees for Defence Housing Australia homes are currently set at a rate of 16.5% of the annual rent (including G.S.T) for houses, townhouses and units.

The fees set by DHA are much higher than those charged by standard real estate agencies, which are generally around 6.1 – 10.3%.

The higher rate is largely a result of the standard of property management, the guaranteed rental return (even if there are no tenants in occupation) and the frequency of maintenance and repairs.

Ready To Finance Your DHA Investment Property?

The first step towards purchasing a DHA investment property is getting finance.

Find out how we can help you get mortgage approval with a lender that offers great rates and an attractive loan package.

Speak to us on 1300 889 743 or enquire online and one of our mortgage brokers will contact you to discuss your situation.