Transcript:<\/strong><\/h4>\nKevin:\u00a0 <\/b>Paying a bond can be an untimely nuisance for tenants, tying up money at the start of a rental period when many people would prefer to spend money on other things. Recouping bonds can also be a real nightmare for some tenants, when accidents or disputes over cleaning put bond in jeopardy. Well, today I can tell you about a new product called BondSure, which is the brainchild of Australian lawyer and insurance entrepreneur Michael Wood, who we tracked down. He\u2019s currently in London.
\nHi, Michael.
\nMichael:\u00a0 <\/b>Hi, Kevin.
\nKevin<\/b>:\u00a0 Thank you for joining us. Michael, tell me about BondSure, and how does it work?
\nMichael:\u00a0 <\/b>Well, we\u2019ve only just launched, so it\u2019s new and certainly it\u2019s novel. What we\u2019ve done is we\u2019ve linked the option of funding a rental bond \u2013 rather than paying it upfront \u2013 with the option of insuring that bond while that bond is sitting with the Residential Tenancy Authority. That insurance cover is for accidental property damage and increased cost of cleaning, two of the things that often arise during or at the end of a tenancy that can erode that bond. The third component of the product is tenant\u2019s contents insurance.
\nKevin:\u00a0 <\/b>We\u2019ll talk about that separately in a moment, but I believe there are about 31% of renters Australia-wide, so this is obviously going to help a lot of them out \u2013 as I said in the intro there \u2013 particularly with coming up with some fairly hefty bonds. Is there a limit on the amount of the bond that is going to be offered?
\nMichael:\u00a0 <\/b>Yes, we offer it up to $5000. We do that because we\u2019re wanting to cater for the areas like Sidney and Melbourne where the rent is slightly higher but also understanding that the average bond around Australia \u2013 the average rental because the bond is normally four weeks \u2013 is around $1500 to $1600.
\nKevin:\u00a0 <\/b>Yes, average rent about $400 a week. Is this going to apply to all tenants? Will there be some form of credits they\u2019ll need go through, Michael?
\nMichael:\u00a0 <\/b>Oh gosh, yes, most importantly. We thought about this because it\u2019s important for the landlord to know that his position is much as it was, if not \u2013 we hope \u2013 somewhat better, because his concern is to ensure that that bond is lodged with the RTA so as to protect him with respect of any breach of the lease or any property damage to his fixtures and fittings. So it\u2019s vital that the right tenants are taking out the BondSure product, and also it has to be emphasized that it is a fully ASIC-regulated product, and in that regard, there are responsible lending obligations.
\nThere\u2019s probably three key credit checks. The first one is an identity check \u2013 this is all quite simple \u2013 and then also a Veda Tenancy Blacklist check. Veda is one of the main Australian credit agencies. Then, thirdly we have some financial questions about income and expense. Then the real challenge was incorporating in our online system a bank account verification check that is required to verify the information we\u2019re given.
\nOne of the positives that we had from the estate agents is \u201cIt\u2019s great Michael that you\u2019ve thought of the credit checks, because we do a certain amount of credit checking ourselves but we can only go so far. It\u2019s great that you\u2019re able to do these checks and also do it online so that it\u2019s quite simple for the tenant.\u201d Also, it doesn\u2019t require much input from the estate agent at all.
\nKevin:\u00a0 <\/b>It seems to me there are great benefits here obviously for the tenants, also benefits for the owners and for real estate agents. Let\u2019s talk a little bit about the periods to pay off because obviously you\u2019re effectively offering them finance, helping them finance their bond amounts. Are those payoff periods then geared to the lease term? Is that how that works?
\nMichael:\u00a0 <\/b>They are to an extent. What we\u2019ve done is we understand that the most common lease term is 12 months but there are also shorter lease periods of six months. In our discussions with the estate agents, we thought it best not to just offer a 12-month period but also a 6-month period.
\nThe idea being that it almost is akin to a savings plan, which is one of the rationalizations for it, which is that what we\u2019re wanting to promote is repayment of principal and interest over a 12-month period and with hopefully the benefit of the insurance maximizing the likelihood of the tenant then getting that full sum back at the end of that 12-month period rather than having to use that bond from the RTA to, say, pay off the principal on the credit card. In a way we\u2019d like to think that we\u2019re promoting savings by having the tenant pay principal and interest over the period.
\nKevin:\u00a0 <\/b>What are the fees? What fees are applicable? Because it is like a loan.
\nMichael:\u00a0 <\/b>The interest on the loan is at an annual percentage rate of 16%. Again, we\u2019ve tried to provide a product at a cost that is well below what we consider to be the rather exorbitant costs of payday lenders.
\nNow, the way it works is that fees are paid upfront, so if we were looking, for example, at a $1500 bond, then what happens is\u2026 Let\u2019s say Joe and Jane are out looking for a unit. All they do is go onto the website, they put in their details, go through the chase, get preapproval, and then once they\u2019ve identified their property, all that\u2019s required is that they go along to the estate agent.
\nNow the cost, if they take the bond loan and the property insurance, works out to be the total cost is the equivalent cost of $40 a week and then if the bond is returned by the RTA at the end of the period, that amounts to $29, meaning that the net cost of the product is $11 a week. That\u2019s with the bond loan and the property insurance.
\nKevin:\u00a0 <\/b>Very affordable. We\u2019ve got a minute or so left, but I did want to particularly ask you about the optional content insurance because I believe a lot of tenants around Australia don\u2019t actually think about insuring their contents, Michael?
\nMichael:\u00a0 <\/b>No, it\u2019s very strange. We\u2019ve have about two million tenants with private landlords as opposed to government tenancies, and it is extraordinary to think that in this day and age where we\u2019re always insuring cars and houses structurally that renters, in particular, aren\u2019t insuring their own contents.
\nWhat our policy does is that it has a standard, sort of market-common sum insured of $25,000 as a standard. It can be increased up to $50,000. It has a minimal excess of $200. And it responds when there is loss or damage to content during the 12-month period \u2013 up to $25,000, as I said \u2013 through fire, storm, theft, malicious act, flood. We cover flood as a standard up to the 25th<\/sup> parallel, which is to about Rockhampton in Queensland.
\nIt\u2019s a standard product, but yes, we\u2019re wanting to promote that because it is odd that renters aren\u2019t insuring their own content. I think $25,000 is generous \u2013 not all renters will have $25,000 of contents \u2013 but we were trying to offer a product in line with the other tenant\u2019s policies offered by the bigger insurers.
\nKevin:\u00a0 <\/b>Michael, we\u2019re out of time, but thank you very much for joining us. Congratulations on the product.
\nIf you want to get a bit more information about it, if you\u2019re a tenant, property owner, and you\u2019d like to find a little bit more about it, the website is BondSure.com.au.
\nMy guest has been Michael Wood. Michael, thank you for your time.
\nMichael:\u00a0 <\/b>You\u2019re most welcome. Thanks, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":" I can tell you about an innovative new financial product that provides renters with an option to pay rental bonds off in instalments. It is called Bondsure. This is a win-win-win for landlords, property managers and tenants. Transcript: Kevin:\u00a0 Paying a bond can…<\/p>\n","protected":false},"author":176692471,"featured_media":9716,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[34,10,11,13,36,17,25,27],"tags":[101],"class_list":["post-9714","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance-topic","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-property-investment-topic","category-property-investment","category-sponsored-channels","category-trends-topic","tag-podcast"],"yoast_head":"\n
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