Newbie - Deposit bonds

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From: Anonymous


Hi all,

This is my first post.

Whilst I have 2 IP's that I have had for sometime, I have never been previously exposed to the amount of non-commercial IP information / experience / content generated by this forum - (to which I am merely but a babe in the woods, I'm into my 4th day of subscription and have been busy reading past posts and archives). This lack of information exposure in the past is due to the fact that I have not taken a very proactive approach, (read slack / lazy / 2 kids since last purchase / complacent), in building both knowledge & wealth in regards to expanding my portfolio.

So before I post my question I just wish to thank the creators & contributors who have increased my enthusiasm, awareness & knowledge.

Deposit bonds - what are they, how do they work, who provides such a facility, what are the benefits and what fees/charges are applied above & beyond those that one would normally incur using a self funded deposit ?
 
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Reply: 1
From: Nigel Kibel


I suggest you visit the website - www.deposit.com.au.

At this website, you will not only find out all about Deposit Bonds, but can also apply on line and calculate the costs.

Nigel Kibel
The Investment Institute
 
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Reply: 1.1
From: Dave :)


Hi Anonymous,

Welcome to the forum.

I have used deposit bonds in recent purchases. They are issued by insurance companies, and take the place of a normal 5 or 10% cash/equity deposit. They allow you to not tie up your existing funds to purchase a property. I just bought an 18 month deposit bond for a $350k + property and it cost me $1200. When it comes time to settle, you will still need to come up with the deposit, though.

They are quite handy and there are ways to buy multiple properties using them.

Personally, I don't think I'll be using my own cash or equity to buy a property again. Deposit bonds are easy and relatively cheap.

I know a great deposit bond broker that I could pass you onto. She understands the process, and also buys IP's using them.

Cheers,

Dave
:)
 
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Reply: 1.1.1
From: Dave :)


Hi Nigel,

You're right - that website has some useful info about deposit bonds. However, I wasn't happy with their service. To get a bond, they required more info about me than anyone has ever needed. The express post system was worked overtime..and even then it wasn't enough! I'm suprised they didn't ask what brand of boxer shorts I was wearing...

The underwriters here are QBE. In the end, I told them to send me all my stuff back and I got a bond elsewhere.

Just my experience...your may have differed. How did you find it?

Cheers,

Dave
:)
 
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Reply: 1.1.1.1
From: Owen .


Dave,

I just had a look at the site too and you are right - huge amounts of info needed. Did the company you went with require pre-approved finance?

I'm guessing this could be a problem if buying off the plan 2 years down the track as most lenders pre-approval is only valid for 3 months or so. Short term bonds would be OK though.
 
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Reply: 1.1.1.1.1
From: Dave :)


Hiya Owen.

The company I used did not require pre-approval for finance. I specified I did not have pre-approval on the application, (even though I did), and they gave me pre-approval as part of their service. This pre-approval is valid up until 6 weeks before completion of construction - 18 months away.

At least I can chose who I'll use for the finance now.

For me, service and speed is important. I sent my application and docs on Friday, and the bond was received by the vendors solicitor on Tuesday...along with a letter to me for finance pre-approval.

That's not bad..in my humble opinion.

Cheers,

Dave
:)
 
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Reply: 1.1.1.1.1.1
From: G V


Hi everyone,

anyone knowing a good deposit bond broker in sydney.

thanks

GV
 
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Reply: 1.1.1.1.1.3
From: Owen .


That's sounds pretty good. Now you have to fess up and tell us who you went with.
 
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Reply: 1.1.1.1.1.3.1
From: Glenn **


Hi Nigel & Dave,

Thanks for the info .

Didn't realise about the anon tag on the post

Glenn

(anon - Newbie)
 
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Reply: 1.1.1.1.1.3.1.1.1
From: Scott Marshall


If buying off the plan "warning" if you have a completion date of, say, 12 months, you will need to get a bond which exceeds 12 months. If construction exceeds the time limit given on the bond, and the bond expires, you could lose the property AND the deposit you were bonded for. BIG trouble.
 
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