Deposit question

[Qinau]

Hi all,

I've read through some of "Word of caution for the newbies." and hopefully that wasn't aimed at someone like me. I am genuinely interested in property investment, in fact I put in an offer on the weekend and left a small holding deposit for my first IP.

*edit - sorry I know I'm a newbie in category #1 and the info in the post was aimed to help me, my point was only that my interest here is genuine.

I have a question on the deposit payable on agreement and banks sign off of the deal, the standard 10%. I notice most in here aim for 5% or lower, is this only for cash flow / credit reasons? I have offered to pay the 10% because I can, if settlement falls through I will get all this back though won't I?

Either the REA or vendors solicitor will hold this in trust, yes?

My offer was rejected but we've renegotiated a price verbally and I will sign a new contract note this week, I could always say I now want 5%.

Any help appreciated.

Cheers

 

[RumpledElf]

The holding deposit is different to the bank deposit - one is usually $1000, the other is as big as you want to make it.

Make sure you sign the contract/offer subject to finance.

 

[Rockstar]

The money is better off working for you offsetting your existing loan interest rather than sitting in a trust fund for X amount of time so negotiate for a smaller deposit but don't be so attached as to let a great deal go by. Pay the 10% if needs be but otherwise negotiate for less - but it may be too late for you now.

 

[Qinau]

Thankyou for the replies, I had hoped to reply myself before now but I've finally purchased my first IP using the advice I've received and read on these forums so thankyou.

I have the deposit and no other loans, the funds are just sitting in an account waiting so I left it as the 10%. I'll lose a little interest but it's not that significant in the overall scheme of things, I just wanted to see if people negotiated lower on the deposit for other reasons.

Cheers

 

[Rixter]

The holding deposit is different to the bank deposit - one is usually $1000, the other is as big as you want to make it.

You mean both should be as small as you can make them.

 

[grossreal]

hi Qinau
couple of things and this is not this purchase but for the next.
the deposit is really worth nothing to you or the vendor you pay it out and they don't get it until settlement
but if you pull out the vendor can get a percentage of it
so the lower you put out the less you lose.
put also as I tell most vendors if I am going to put any deposit down then I am going to buy the property
and as a business person why waste money.
the money goes into an account that really we get nothing.
so does it matter if its 1 dollar or 1mil they don't get it until settlement anyway.
now at this point it when you start to horse trade and really this is the best part of the deal
you are like ramsey in his kitchen you are one chef and your up against ramsey and one is going to win.
and yes it get to swearing and shouting and I like it.
but at the end of the day the meal gets made or the deal gets done.
but this is all part of the fun
and there are heaps and heaps of ways of driving down that deposit.
and yes you can pay 10% and so can ramsey send out any meal but thats not your job.
in investing your job is to get the best deal for you and thats not to give out 10% just because its asked for.
maybe thats me but I negotiate everything in a contract thats deposit settlement times and even default interest.
why
because I can and I like to.
anyone can pay 10% and thats fine as long as you want to
I pay under 1% or 5% if a fund or a bank( as those pencil pusher will never go any lower and they are not into any fun of negotiating would love to see half of them at a bali or pacific market probalbly pay full price for everything but that off the post)
and have not as yet paid 10% and if I had to would can the deal it would really have to be some thing very special ( and haven't seen any really special real estate).
there is no problem paying any deposit as it comes off the price anyway
but I see it that I put or give as little cash as possible into a deal and that includes the deposit.
but that me
if I missed a couple of .. add them and a couple of ,, and a few
AAA

 

[grossreal]

hi mods
can you delete the first 2 as there is a cliche and they won't let me delete leave the last its the same just changed the wording put up loaded all there as typing.
and now won't let me delete

 

[Qinau]

Thanks for the comments grossreal. I see what you mean and will keep it in mind if I make a future purchase.

I've just left a very small holding deposit, and agreed to the 10% now. It's my understanding that the only way I would lose a percentage of the 10% is that if I pull out before settlement (for whatever reason). There is next to no chance of that happening as obviously if the finance falls through I wouldn't even have reached the point of paying the deposit but point taken.

Cheers

 

[oneuppmanship]

I've just left a very small holding deposit, and agreed to the 10% now. It's my understanding that the only way I would lose a percentage of the 10% is that if I pull out before settlement (for whatever reason).

Out of the many, many houses we have bought (and sold), we have never paid more than $1000 deposit. Mostly, it's been $500 or so, and if you're nice enough about the negotiations, you can get most things through.

The agent or vendor is not going to risk losing the sale or their money, due to a deposit amount, which just sits in a trust account anyway.

Nowadays, I'm starting to enjoy seeing what I can get away with when negotiating, yet bottom line is, agent and vendor just want the sale to go through.