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  • #987159
    rthorntn
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    • Total posts: 20
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    Hi,

    Thanks everyone for all the invaluable help in the past.

    I have taken on a commercial property and to get the keys tomorrow I need to provide an unconditional bank guarantee with no expiry date, it’s a small space so they want three months rent guaranteed.

    Prior to signing the lease I went to Westpac and asked about it, they said it’s easy, we setup a deposit account and we transfer the three months rent in there and we lock it for the duration of the guarantee, initial fee is $250 and then and additional $100 for every six months the guarantee is valid for, so for this 24 month lease the cost for the guarantee is $650, that seems like an awful lot, does this sound correct?

    I googled it and one of the links seemed to suggest that you could get a guarantee without locking up your capital, I could imagine the $650 would be justified because it’s basically insurance?

    $650 to lock up my capital for two years seems odd, the guy said the process takes all of about 30 minutes, so I am not being charged a lot because it takes a long time to setup.

    I have the capital so that isn’t an issue, it’s just I would rather not pay out as much for the bank to set it up ($650 is nearly a months rent), if it’s legit is anyone aware of any banks that do them cheaper?

    Thanks for looking.

    Cheers
    Richard

    #1161393
    Steve_Minshall
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    • Total posts: 518
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    Hi Richard,

    The bank should be paying you (a very small amount of) interest on the deposit which offsets against the fee for the deposit. With the CBA I have paid 2% fee but then I get a 1.5% interest rate. So the account cost in the end is .5% per annum.

    If your bank is similar it will cost you say 0.5% per annum +set up fee, +loss of value due to inflation.

    Also these bank fees are business expenses so they are in pre-tax dollars not after tax income.

    You still have to pay out but its not as bad as you think and there is little you can do to get around a rental bond.

    #1161394
    perthchampagneclub.com
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    Is this common? I’ve never heard of it requested before?

    #1161395
    Steve_Minshall
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    perthchampagneclub.com, post: 186514 wrote:
    Is this common? I’ve never heard of it requested before?

    I have done it with my premises. I believe that landlords do it when they don’t want to deal with the admin involved with receiving bonds. With a bank guarantee it is up to the renter to go and organize it all but it gives the landlord security against defaults etc.

    My deposit was only for 1 month’s rent though.

    Pretty much every rental will involve some sort of bond, this just another way of doing it.

    #1161396
    The Rogue Counsellor
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    So if you go to the CBA Richard, and you’re offered something similar to what Steve has, you could go back to Westpac (if that’s your bank) and ask them to match it.

    If Westpac is your bank and won’t match what the CBA can do, you could go back to the CBA and ask if they can match whatever other products you have bought from Westpac, up to and including a motgage.

    Banks sell us services and yet we seem much less inclined to be as rigorous with them as we are with other sellers. I think they need to earn our loyalty and some banks are starting to recognise they too have competitors.

    Good luck :)

    Lee
    The Rogue Counsellor

    #1161397
    Tony Manto
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    Like any business Banks are all different.

    I would shop around to find a bank that gave you the best deal.

    As already mentioned, they may charge you but they also should give you interest on your money that they are holding.

    No one wants to pay more but the bottom line is its just another cost of doing business that you need to allow in your calculations.

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