deposit bonds....aarrrrggghhhh

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From: Joo Joo


please help, one mind alone cannot find a way through my situation.

Sorry people i'm going crazy, are there any insurers who would give me a deposit bond without pre approval and without something as ridiculous as equity 5 x value of deposit. How does HK do it??

Say i do get approved somehow (which i strongly doubt unless someone knows a really flexible lender), what happens with the deposit I saved for this pre-approval? is it locked up? or am I free to do what I please with it? eg get the funds to get pre-approved for the total amount of the loan then buy a car with it for instance

Does this loan increase my liabilities or because it is only a preapproval, it does not mean I actually owe the money? and hence can borrow for other things without working equity out of this otp?

there must be a way for someone with little equity to secure an otp and a car.

still diggin
joojoo
 
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Reply: 1
From: Michael Croft


I suspect that the HK disciples have stuffed it for the rest of the IP people with no (or little) equity. I believe the deposit bond peoples rules have been re written in the last 9 months to stamp out the HK type practises, i.e. buy 5 (or as many as you can) OTP units "with no money down" and on sell before settlement aka a few disasters waiting to happen.

Sorry this is no help, keep trying and good luck.

Michael Croft
 
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Reply: 2
From: The Wife


HI Joo Joo,
I cant help you with your problem sorry, But I wanted to know why you have chosen OTP property?

TW
~Life is a daring adventure, or nothing at all~
 
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Reply: 2.1
From: Ayesha Todd


Just on this topic of deposit bonds, we used a deposit bond on purchasing our primary place of residence and didn't seem to have any difficulties. We were refinancing our IP from 80% up to 90% and while that paperwork was going through the bank with the IP gave us a deposit bond to purchase our other property with another bank. Maybe we were just lucky but this is how I thought all deposit bonds worked?
 
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Reply: 3
From: Property Investor


HI TW,

What is your view on OTP properties?
You seem not to like them.

Regards,
Mannie.
 
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Reply: 2.2
From: Joo Joo


hey TW,

Its only because I am in negative equity (i bought clothes with my overdraft)and am trying to find a way to purchase a second property now rather than in endure a year of saving. An otp lets me guarantee a property and if chosen properly, a profit too, without me spending any money now. I also want a new car, so serviceability would be a problem otherwise.

Basically my plan is to borrow about 30k off my parents, use this to get pre approval for the loan, get a deposit bond, get finance for the car (noting that i didnt get the loan for the otp, only the pre-approval) and hence this will not hinder my approval for finance for the car. Once this is all done ie exchange of contract using Dep Bond, finance in place for the car, I plan to return the 30k to my parents. But I'm not sure if I can do this, I used this 30k as a deposit for the pre-approval, but i feel its not tied up as the loan has not gone through, and i can do with it as i please. Does this sound ok???????



perplexed
joojoo
 
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Reply: 4
From: Frank Shead


Perhaps you should ring me and I may be able to answer your questions about deposit bonds frankshead@ym2t.com.au or 02 9412 2326
 
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Reply: 4.1
From: Rixter ®


Why not use a "Bank Guarantee" as opposed to the usual "Deposit Bond"!

BG's are virtually the same as a DP but only require 1 times your equity for security purposes instead of the usual 5 times your equity for security purposes for buying a Deposit Bond through an Insurance Company.

Happy Investing,
Rixter :)
 
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Reply: 4.1.1
From: Joo Joo


Thanks Frank, i'll call you tomorrow.

Rixter, i am going for a deposit bond because as far as i know they only need a pre approval and correct me if i'm wrong, once one gets the db he can attain finance elsewhere on settlement and is free to dispose of the deposit used to get the preapproval.( Not the value of the deposit bond, just the initial deposit to get approved).

However with bank guarantees it is only a delayed settlement,
where:
a. they dont last as long as db i.e 2 year settlement
b. you are to continue using the same financial product that was preapproved to you.
c. The bank also retains the deposit used for approval and does not allow you to spend these.

I'm not too familiar with bank guarantees but my situation i.e do not have equity or a deposit. I want my parents to transfer 30k into my account, use this as a deposit to get preapproval for the deposit bond. And then I would just transfer this amount back into their account on exchange as it is accessible i.e it is not kept in a trust fund . Bank guarentees do not allow me to just return the money used to obtain approval i.e 30k deposit off my parents.

sorry about the confusion.

still perplexed..
joojoo
 
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Reply: 3.1
From: The Wife


HI Mannie,

I didn't mean to give the impression that I dont like OTP. I think its one of the many techniques ( even though OPT people think its the ONLY technique :eek:)

Its just not my niche today, maybe tomorrow or next week or next month I may feel comfortable with doing them, but right now, I'm pretty successful doin what I know, which isn't OTP.

Cheers, TW
~Before you criticize people, you should walk a mile in their shoes. That way, when you criticize them, you're a mile away. And you have their shoes~
 
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Reply: 2.2.1
From: Duncan M


>I also want a new car, so
>serviceability would be a
>problem otherwise.

Herein lies part of your problem.. Do you want a NEW car or just a car good enough to get you to and from work etc?

I'm not sure if just an Australian archetype.. leave school, get your first job and then take on a massive car loan at a variable rate over 5-7yrs, pay massive insurance on your car because its new and you're under 25.. To me its one of the key things that would delay home ownership from the early 20's through to the early 30's..

Some poeople just never seem to learn and continue through to retirement with Personal Loans for cars..

Duncan
 
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Reply: 2.2.1.1
From: Joo Joo


i know you're right duncan, but is that ever enough for a 21 year old. I am trying to figure out a way to do both property and image, I cant wait till i'm 30 to drive around in a nice car (peugeot 406 coupe, 85k, beautiful car). However, I will not make the purchase if it hinders my investing totally, sure it will be a setback but i think i could pull it off.....the car, a dha property which i have, hopefully an otp and then start up a business along side my full time engineering job and save, save, spend, save.

image conscious
(stupid)
joojoo
 
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Reply: 2.2.1.1.1
From: Duncan M


I'm 32 (I think),

I've bought 3 new cars in my life and 3-4 second hand ones, mostly on finance. If I'd kept the trusty old ute that I had in 1988, I'd have 4-5 more IP's than I do now. When I was 22 I had a car worth $5,000 and and a personal loan for it of $12,000, thats a nasty feeling.


I've just paid off our LAST new car (Mrs Duncan's car), and I now drive a $1500 beat up old ute that blows smoke, I get funny looks at the lights, but I feel kinda smug that I'm now off the Vehicle Finance round-a-bout and happy to drive something that helps me keep more of my dollars at work making more money.

Reading "The Millionaire Mind" and the "The Millionaire Next Door" might help, but at the end of the day, if you care about the external perception of wealth to your peers, you might never be truly wealthy..

Duncan.
 
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Reply: 5
From: Denise Macadam



Greetings Joo Joo

God I can hear the collective tutt tutts and the nashing of teeth reading your posts - from someone of .?$#@*8...age, you are not doing yourself any favours - cars clothes etc, mum and dad to lend me $30,000 !!!! - I hope you really appreciate your position. From someone who has blown so much on cars travel and the good life, it counts for nothing later on.
A lovely vintage Jaguar that cost me the price of a house to maintain year after year, what a waste.
But at 21 you are not going to fully appreciate the wisdom of these helpful and generous people who have replied to you.
The only thing I have ever remembered from that Paul Clitheroe Money show was this
" buy the cheapest car your ego can live with"

I know nothing of deposit bonds - but i do know i would give anything to have made a better go of the opportunities that came my way.

Good Luck
Joo Joo
 
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Reply: 6
From: Peta McIntosh


Qualifying for a deposit bond requires virtually the same due diligence as applying for a loan because the issuer/insurer is guaranteeing your performance at the end of the day and if you default they will come after you for the 10% deposit. They also want to know where your 10% will come from at settlement, where is the money for the stamp duty, etc. FHOG can be used as part savings. Visit website "depositbondsonline.com.au" for a full explanation of deposit bonds and the financial criteria you need.

No-one is going to give you something for nothing and HK has given the wrong impression of bonds and their use. They are not gambling chips!

If you don't have any savings or would not qualify for a loan yourself, why don't you suggest your parents go as guarantors!
 
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Reply: 2.2.1.1.2
From: Michael G


JooJoo,

Hi I'm 31, when I left school I pretty much walked into the IT industry with a very nice paying job, my first car I bought for $1k, then after my brother wrote it off for me I bought a $4k car, but after the troubles I had with that I went and got a $25k loan and bought a Pulsar SSS, I think I would have been only 24 at the time.

That's a lot of money to pay out each month.

Anyway, as soon as I got my first scratch on the car the feeling of a new car sort of faded, and the more scratches and road chips, well you get the idea. But remember I was still paying a new car loan.

Guess how much that car is worth today?, do you think its gone up in value? ha!

Its worth about $5k at the most. I still have that car its done about 280,000kms now, last month I replaced the motor (cost me about $600 with the help of my mechanically minded brother).

Fortunately, about 3 years after I got that car loan, I swapped jobs and was able to cash out my holidays and long service leave. With that I paid off the car loan.

Then a few years after that I again swapped jobs and was able to cash out. This time a good friend introduced me to investing. With that money I used it to put a deposit on a house purchase costs were about $20k (less than the cost of my car. I bought that townhouse in '98 for $167k, its now worth $250k+ whereas my $30k car is now worth $5k.

That's my story. My advice to you.

Speak to some mechancial friends, ask them what 2nd hand car they would recommend, that;

- is easy to repair
- parts are cheap
- is comfortable to drive (as an investor you drive around alot)

Look for something under 120,000k mileage, the major problems begin around that area. Buy something say 2-3 years old. Someone with a warranty would have had all the problems fixed during the warranty period.

And if you want that new-car smell, you can buy a spray can.

It might be a boost to the ego to have a new car, but wouldn't a bigger kick be the ability to have parties in one of your properties?

Look the secret to investing is time, the sooner you start, the bigger the payouts. Cars, money, houses, etc, you can get anytime, but time is a limited resource, just ask anyone here.

At 21, you would be one of the wealthiest people here, in regards to wealth of resources. You're already wealthy, you just don't know it yet. How you spend your wealth, will determine how well off you are.

Regards
Michael G
 
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Reply: 6.1
From: Joo Joo


thankyou kindly for your views.

I dont know, i just dont recognise the value of money, ok investing is great, but why do it if you are not going to spend. Invest, invest and invest some more but once you make a whole lot of money by the age of 50, what are you going to do with it? Dont get me wrong, i have one property which i plan to keep and an otp on the way, but there has to be a balance.....a good holiday or a nice car. I dont know about the rest of you, but I only want to make millions through investing so I can spend it....my 406 coupe, my 15k wardrobe, a yacht and eventually my house in hunters hill. Its not like i'm doing only this, i am investing too, but it gets to a stage where another property is unattainable, wheras a car is.

I guess what I'm trying to say is that i am certain that it would be much wiser to retain my VW golf but i'd rather have two properties, a 406 coupe and a wardrobe than three properties. My main reason for this is i am struggling to purchase another property and must turn to an unconventional way to attain this, but a third one is out of the question, at least until i graduate uni or sell this otp. So although, this car would set me back about 15k in depreciation in two years, i am willing to have this burden and perhaps Denise is right "buy the cheapest car that will satisfy your ego", I am a spender and will try my utmost (God willing) to make a lot of money in my telecommunications degree and property investing only to spend it all through the years.

I'm sorry, i suppose i have a different view on life and u know what, i will probably be proven wrong, but i guess its my strong christian faith that makes me realise the insignificance of this life, so i thought, why not make the most out of it and have the things that I want.

hope i havent dissapointed anyone.

I called Frank, (see above), he was good he answered my question and it seems like i might be able to attain this otp after all. I dont have to pay off anything for the otp till settlement, my other property is positiveley geared, i will not be able to get a third one, so i am left with two options....save everything over the next year or so or i could spend a fair bit and enjoy myself. I have already made a few mistakes in investing, all i could do is try to find strategies which i could afford and makes me money and also one which allows me to a certain extent to have the things i want and enjoy my life. It is proving to be hard and it will get worse as my debts increase, but somehow i trust that in one way or another, everything will be ok.

sorry to be a bore
joojoo
 
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Reply: 6.1.1
From: Asy .


Well, interesting reply Joo Joo...

Shows a distinct lack of maturity, but that will come... I am interested to note that you say that your Christianity will assist you, and yet, your interests are a car, and a wardrobe...

Not a word about benevolence, nor any form of charity... hmmm...

(Sorry if I am offending anyone here, but this seems to be the problem with most people who profess a faith, but do not practice what they preach)

In any case... I wish you luck...

asy.

Oh, just by the way, purely out of interest, are you a he-Joo-Joo or a she-Joo-Joo? :eek:)

There are no problems, only solutions which have not yet been discovered.
 
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Reply: 6.1.2
From: Yuch .


Hi Joo Joo,

Apparently, you are not ready to start investing yet.

What about you go and enjoy your nice car and wardrobe, and come back when you are ready.

Some people learn from other people's experience while others just have to learn a hard way. Tis ok.

Good luck.

Regards
yuchun
~ The secret to success is to start from scratch and keep on scratching. ~
 
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Reply: 6.1.2.1
From: Yuch .


Actually JOO JOO, I have another alternative soluction for you.

I know someone wrapping in Sydney metro, you might want to give him a call to see if he can wrap you a property in Sydney. This way, you get to spend money on your nice car and wardrobe, and you can also buy a house.

The guy's name is Lorenzo, he advertises in Sydney Morning Herald. I've seen the ad on Saturday's Herald.

Regards
yuchun
~ The secret to success is to start from scratch and keep on scratching. ~
 
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