Long Leases and Guaranteed Rent on Investment Property

When music teacher Peter bought his first Defence Housing Australia (DHA) property in 2001, he never would have predicted one day owning six; including four with his friend, Greg.

I was living in Karratha, remote Western Australia, but I wanted to buy an investment property in Perth because I intended on living there at some point in the future.'

Living so far from Perth, Peter needed an investment property that was hands-off and hassle-free.

I didn't want telephone calls telling me about bad tenants, or that the property was vacant or needed repairs. So my ears pricked when I heard some teachers in the staff room talking about investing with DHA. It was ideal for my situation; I'd have a long lease with guaranteed rent, DHA would take care of the property management and maintenance, and I could move into it at the end of the lease.'

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Impressed with the ease of his first DHA investment, Peter decided to buy a second property as a strategy to set himself up for retirement.

I was fortunate to buy the first property at a good time and so made very quick capital growth. I started researching the property market and learnt about how to use my equity to leverage into more properties.'

He approached Queensland-based friend, Greg, about investing in properties with him.

Greg was also interested in investing in property; and I'd spoken to him about my positive experience with DHA. I knew if we invested together, we could buy properties more quickly.'

Within 18 months, Peter and Greg bought four DHA properties in Port Kennedy and Karratha (WA), Darwin (NT) and Townsville (QLD).

One of the things I'd learnt about in my research was to diversify my property portfolio. There is a fair chance that somewhere in the country will be experiencing good capital growth while somewhere else is not, so we invested in different locations to spread our risk around.'

Peter says that DHA's property management and maintenance services made diversifying his portfolio much easier.

We completely trust DHA to look after our properties.'

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We don't receive phone calls telling us that repairs need to be done; DHA organises it all for us. We don't have to chase up rent. DHA pays it directly into our account every month, regardless of whether there is a tenant in the property or not.'

Peter says the biggest lesson he has learnt through his research and experience is to not become emotionally involved in his investment decisions.

I now look at my properties as a business that is going to bring me an income. With DHA I basically buy myself a business, knowing I've got guaranteed rent for the entire term of my lease. This makes it easy to hold the properties for the long-term; so if prices continue to rise, I'll achieve good capital growth. If you look at it that way, DHA investments really are a no-brainer.'

Peter says he never could have imagined that investing in property would enable him to give up full time work.

My life has changed significantly thanks to DHA, and the performance of my investments. I went into it with the simple motivation that I'd need a property to live in; I now have the financial freedom to choose if and when I work.'

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Attention: Investment is subject to the terms of the lease. Investors retain some responsibilities and risks. Investors should seek independent advice.