QLD Looking to buy DHA property in Raceview

From my calculations (am very much a newbie investor here!), we will have it negatively geared for the first few years. The plan is to pay it off as soon as possible and have it as an extra income stream. Hoping for some capital growth in the area in 15-20 years and sell it then.

 

Please talk to a specialist in that area before buying. Simply hoping for capital growth is a terrible way to invest especially when you're considering paying above the average prices for the area and for something you can't add any value to (or that I can see anyway).

A buyers agent will typically cost you around $10,000 to source a property for you.

Consider buying something under market value, do a quick cosmetic upgrade to add value to the property (usually gives you equity from day one) and most likely a much better yield. You don't need to be in Brisbane to do or arrange the upgrade most buyers agents will help you with that or any property manager will help.

 

Consider also looking at other suburbs with a much better Capital Gain potential for the same cost. If you are going to allow for this purchase to be in the Negatively geared territory might as well buy something that Gains you more than the cost of borrowing ( if IP interest rate is around 3.5% per annum ) look for properties that can give you at least 6% Capital Gain per year ( 2:1 ratio )

 

Candice with current vacancy rates in Raceview at 0.9% the rental guarantee is not as valuable. You should not have a problem getting a tenant with such tight vacancy.
I'd be more concerned about prospects for strong capital growth when choosing a location given this was a query raised in your original post. For $410K purchase price I'd be recommending other locations ahead of this suburb for stronger capital growth prospects.

 

Bit exxy I think. Builders premium in that price maybe? Try to get 4 bedder 2 living rooms for sub 350k ideally In Raceview. And as others have said no issue with tenants.

 

If you are happy with the location and if the price is right then I would buy it.
Management fees: Yes, it sounds high at 16.5%. Standard 8% + fees + small costs will easily come to around that figure, if not more. You don't need a tenant pretection insurance either.
Lazy investor: Yes, it is lazy. So what? The less you hear from your PM the better.
Capital growth: No one really knows. If it is really well known factor, then the price is already built into it. Whoever claims otherwise, are running some sort of property related business.

Make sure you are willing to keep it for long. It would be hard to re-sell.

Disclaimer: 25% of my IPs are DHA. First one is out of their contract period. 2nd one is into their optional years. 3rd one is still under the contract period.

 

It really depends on the state (BAs charge differently and in different ways generally) and the size/price/complexity of the purchase. Some will charge anywhere from 1%-2.2% of the purchase price, some a fixed fee that is scalable with price brackets. I personally don't believe in a percentage of the purchase price as this is counter intuitive to a BA getting you the best price (note: not the cheapest price, the best price - there is a difference).

I wouldn't pay a BA less than $10k because as with everything, you get what you pay for. For $1-1.5m purchase in Sydney you'll pay around the $20k mark. Melbourne tend to charge more of a % and Brisbane is a little cheaper again. The cost plus or minus a few grand is less relevant than what you're trying to achieve though. A good BA will more than make up for their fee on the way in due to better negotiation skills and asset selection, as well as the long term performance of the property, relative to the average person with little to no buying experience doing it themselves.

See here for more info. I would also only use a BA that is a member of REBAA. Some will argue against these sorts of professional memberships, but it's generally accepted in industry that it shows a level of commitment to a professional and voluntary code of conduct that pushes a higher level of professionalism. It would be unlikely you'll find a low grade BA who is a member of REBAA. If they're not a member, ask them why not.

Cheers,

Andrew

 

Thank you!

 

Hi Candice

I have owned 7-8 DHA houses since 2001. Sold some over the years, I fully paid off my PPOR in Sydney as a result, I have equity in both Sydney DHA investment homes and I sleep well at night. Never had a phone call or issue. At end of the lease of our Townsville one, we tried the local market for 12 months and it was a stressful time. NEVER again. Eventually selling that one at a loss. Our only loss out of the 7 properties. Yes it 16.5% but believe me how much money do you put on peace of mind. Just my thoughts and experience.

Good luck

 

Thanks so much for sharing. We are still really keen to invest in DHA for that peace of mind you speak of. We both work full time and don’t need the extra stress. We managed our own IP a few years ago so we know it can be a bit of headache. Thanks again!

 

I almost purchased a DHA home in Yamanto for in late 2019 ... I pulled out on an unsatisfactory B&P ... I was also attracted to the guaranteed rent for 9 years ... I ended going with a BA & used Streamline Property Buyers to purchase a home in the Moreton Bay region with the property rented in a week during the peak of COVID-19 in April ... I can highly recommend Melinda, Scott & the Team at Streamline ... they are very professional and are the experts in the Brisbane property market, they also make the process of buying educational for their clients ... Good luck with your IP journey Candice ...

 

Thanks for the info. We are taking everything into account so that we can make the right decision! It's even more difficult with the uncertainty brought about by COVD-19. BUT sill counting our lucky stars that we are fortunate enough to be able to invest during a pandemic!

 

Hey thanks for the recommendation @NewGuy88 ... now I'm trying to guess who you are

 

@MelindaJennison ... You're welcome Melinda, I'm enjoying listening to your podcast & continuing my investment property education ...

 

hi Candice,

did you end up buying the property with defence in raceview and if so how has it been? We’re looking at getting a property in Raceview and I have all the same questions you had in 2020

 

Yes, we ended up buying it.
Happy with everything so far - no issues and stress free! Rent comes in every month and we receive quarterly inspection reports. Haven’t had to pay anything extra (e.g. maintenance, repairs - covered by management fee). Plus Ipswich property prices are still going up so happy we bought it last year!

 

My rent in Raceview now $400 / week (4bed) for comparison. Think DHA do an annual review?

 

They do a yearly rent review in December I think. Hoping to get a fair and reasonable increase in rent for 2022