Deposit Bonds

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From: Dave


Hi everyone,

For those of you who use deposit bonds in place of a cash deposit when buying property, this may be of interest.

I have finally (this morning) found a bond broker who gives approval within 24 hours. Bonds life up to 36 months to the value of $1mill. Better still, they approve applications for multiple bonds. They are processed individually, as though only one property is being purchased - but do it 3 or 4 times if you're that dangerously inclined. So, what that means is this. I can now sign contracts for multiple properties where previously only one was possible. (damn, sorry if this sounds like a HK ad - it's not!) True, I wear the risk, because the contract must settle eventually. However, if it's a long settlement period (12-24 months) and in a high growth area, that's a risk many investors using this strategy would take.

....I can almost see the flippers salivating already. Now that I know how to buy multiple properties, and have some experience in negotiating with developers in getting a discount, I may even look into flipping.

Those of you who specialise in 'flipping', and are willing to share your experience, please email me with an 'idiots guide' - maybe even I could do it.

For those of you who want the contact of the deposit bond broker, you can also contact me.

Have a great weekend everyone.

Cheers,

Dave

 

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Reply: 1
From: Robert Longmore


yes an idiots guide to flipping would be very usefull, i only know how to do this in basic theory. always willing to learn!

 

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Reply: 2
From: Ray .


Dave,
I am currently applying for a deposit bond
thru QBE. The qualifying formula requires equity
equal to 5 times the bond amount required.[ for
a term up to 36 months ] You can obtain deposit
bonds for periods up to 48 months , but you then
require equity equals 8 times bond amount.
Could you clarify your situation of applying
for multiple bonds at the same time? I would have
thought that a 2nd d. bond would need a bond :
equity of 5 :: 1 over and above your 1st
application. Maybe I have got this wrong!
Please clarify --- anyone?

PLUTO.

 

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Reply: 2.1
From: Dave


Ray,

I am approved as long as I have enough cash or equity to allow me to pay the 10% deposit today. They consider 100% of cash holdings as well. (Unlike others who only count 30% of cash, stating that this could easily be spent before the 18 month period). Also, a real estate agents market appraisal on letterhead is all you'd need to cover the valuation side of the application.

Then, because brokers can go to various underwriters simultaneously, applications for a second and third bond are made. The only reason why the qualifying requirement for a second and third are not even greater, is that a different underwriter is used in each application. Please note that this is not common practice, and each of these underwriters would not know that other d/bonds have been purchased. This risk is quite high, because you still have to come up with the 10% at settlement time, as well as the balance of purchase price. However, for those that on-sell prior to settlement, especially in high growth areas and for settlements over 12 months, using deposit bonds to secure multiple properties for the purpose of 'flipping' seems reasonably straight forward.

Cheers,

Dave

 

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Reply: 3
From: James Wollaston


Hi Dave,

Is this bond broker anyone we know?

If it is the nice lady that I am thinking of I am glad that Brad put you in touch.

Flippin' 'eck! The possibilities are endless.



James.