Written

For

The

Australian

-

Can

a

shot

at

Defence

Housing

win

war

on

returns?

Would you hand over 16.5% of your rent to a property manager? Sounds outrageous — but that's exactly what Defence Housing Australia charges landlords on houses (13% for apartments), and it might still be one of the more compelling property plays going around.

Let me explain. DHA was set up in 1988 to house Defence Force members, and today runs an $8 billion portfolio of 18,000 homes. The model is straightforward: everyday investors buy newly built properties and lease them back to the federal government for nine or 10 years, with rent reviewed annually by an independent valuer at market rates.

Yes, those management fees look eye-watering. But dig deeper and it's not as bad as it appears. The fee covers day-to-day maintenance, most non-structural repairs, and end-of-lease restoration including new paint and carpet. Research by BIS Shrapnel found that once you factor in zero vacancies, no reletting fees, and included maintenance, DHA running costs actually came in lower than traditional investment properties in every scenario tested.

So what's the catch? A few things worth knowing. Stock is limited to a handful of suburbs in each capital and select regional areas — you can't cherry-pick that dream street. Properties are sold via ballot at a fixed price, so bargain hunters need not apply. And during the lease you can't subdivide, add a granny flat, or renovate to squeeze out extra capital growth.

My take: DHA won't suit investors who want hands-on control or who love the value-add strategy. But for conservative, time-poor investors, first-timers, or SMSF trustees seeking a set-and-forget property with geographic diversification, it has genuine appeal. Guaranteed rent, market-rate reviews, maintenance covered, and depreciation benefits — plus, as I said, you can't really ask for a better tenant than the federal government.