Defence Force Housing

Hi Scott,

We’re in our late 30s with three kids (16, 14 and 5) and a household income of $220k. Here are our assets: home $350k (owe $190k), holiday cabin $40k, boat $55k (owe $20k), Mojo $10k. Our accountant is recommending we buy an investment property from Defence Housing Australia -- taking out a $400k loan and only paying $100 a week. He says we will get a bigger tax refund and set ourselves up for retirement. I want to pay off our home asap and then invest. My husband says I am impacting our retirement success. What do you think?

Jenny

Hi Jenny

First, you shouldn’t invest solely for tax reasons -- though some accountants do, which is why so many of them got their clients caught up in those awful Managed Investment Schemes (MIS) which wiped out the life savings of thousands of retirees.

Anyway, if I were looking at your situation, I’d knock off the boat debt first and then salary sacrifice into super at $25,000 each. Then I’d aggressively pay down the mortgage. If you want to invest in a property thereafter, you should buy a quality family home in a good area, from a local real estate agent.

Steer clear of packaged ‘investment opportunities’ like Defence Housing Australia (DHA). Why? Because they’re too expensive. Generally you’ll pay anywhere from a 10 to 15 percent premium for a DHA property -- and the areas they build in may not be high growth. Plus, DHA charges a nosebleed 16.5 percent management fee each year of the lease. Tell your husband that I’m on your side.

Scott