16/12/2014
They call this time of year the “silly season”. Everyone is madly dashing about preparing for Christmas, the school holidays or the end of the working year—there is little time to worry about anything else. But silliness aside, it’s also a time to relax and reflect on the things that are important to us—be that family, friends, health, travelling or your career.It is at this time of year that many investors are grateful for their passive investment strategy – grateful for an income stream that still allows them to have “their cake [Christmas pudding] and eat it too”.
So what is a passive investment? Also known as a “buy and hold” or “couch potato” strategy, passive investing requires little from the investor, aside from patience. Unlike active investors, passive investors buy a property for long-term profitability, rather than expecting to profit from short-term price fluctuations.
The Defence Housing Australia (DHA) investment product is a popular choice for the passive investor, particularly those that like to invest in bricks and mortar. Billed as a ‘worry-free investment’, the DHA investment program features a sale and leaseback clause. This means that your investment property is leased back to DHA for a period of between nine and 12 years. During this time DHA manages the property on your behalf and you do very little aside from watch your investment mature.
One of the biggest and most time consuming issues for property investors is tenanting the property—DHA has that covered too. DHA’s rent guarantee means you can budget easily knowing exactly what your minimum rental income will be, for the entire term of the lease. Unlike conventional residential property investment, DHA calculate your rent from the date of settlement. In addition, with the exception of the first and last month, they pay your rent monthly in advance throughout the lease term—it’s even paid when the property isn’t occupied. Finally, for the true passive investor a distinguishing feature of the lease is DHA Property Care—an extensive range of property-related services provided throughout the lease term in return for a service fee. The services included in this program include property management, annual market rent review, repair and maintenance and a lease-end restoration. So, in short, you benefit by receiving minimal phone calls or bills about property management, repairs and maintenance; your rent is reviewed annually to market value; and your property is restored at lease-end.
Aside from the passive perks, there are plenty of other perks for those looking to invest in the DHA program. Among these is the geographically-diverse nature of the portfolio, which means that you can pick an investment property from a number of different locations across the country. So even if you like to study the market closely, options are always available to buy into growth areas. Also, due to its contracts with the Department of Defence, DHA’s properties are built to the highest standard and often feature innovative building and design techniques—all features of which you will experience yourself at the end of the lease.
So, in the coming weeks, when you’re running late to that Christmas work function, counting down the hours until the shops close, or wishing you had more time to spend with your friends and family, think about how you can get your money working better for you… without the effort.
To find out more about DHA’s property investment program, visit dha.gov.au or phone 133 342.
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
