All Topics / The Treasure Chest / How Much deposit?

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  • Profile photo of FergusGartlanFergusGartlan
    Member
    @fergusgartlan
    Join Date: 2002
    Post Count: 7
    June 3, 2002 - 1:16 pm

    Hi all,
    Great to be part of this exciting group
    I have 3 questions for the established wrappers out there.

    1. How much deposit should I put down when buying a property for wraps. I know Steve & Dave usually put down 20% to avoid mortgage insurance as that may limit the no. of properties they can buy
    This is what I planned to do until I spoke to a mortgage broker, who told me about a wrapper who has wrapped 20 properties and has only used 10% deposits on each meaning he has more money left to invest.

    2. How much should the person I am selling the hose to get the house insured for? my buy price or their buy price (mine +20%)?

    3. At what point should I ask my client for their deposit ($2K)?
    As soon as I put my deposit down or at settlement when they sign their contract to buy from me? I am conscious of them walking just after I’ve bought the house for them.

    Thanks in advance
    Fergus

    Profile photo of darrenbdarrenb
    Member
    @darrenb
    Join Date: 2002
    Post Count: 71
    June 3, 2002 - 4:30 pm

    Fergus, if you can get 90%, milk it for as much as you can, thats my advice. Insure the house yourself, dont let the wrappee do it and overinsure rather than under insure. If you buy a house for 50k, insure for 100k, because if it burns to the ground, all you will be able to afford is a granny flat! If the wrappee is interested, get some sort of holding deposit ($500) and the balance when you exchange contracts with them. Hope this helps.

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763
    June 3, 2002 - 8:47 pm

    Fergus,

    In response to your questions, my thoughts are:

    Qn 1: As much as you can get, bearing in mind your wealth strategy and also the relationship you have with your lender. In our case, we knew that paying off debt increases our cashflow and as such we were happy with a 20% deposit. This does detract from the available cash though.

    Qn 2: As Darren has indicated, I believe that you should insure the building for the cost of building a replacement dwelling. Be sure to allow for GST too.

    Qn 3: Get the deposit at the point of signing a contract – or earlier if it is held in trust by a solicitor for the purpose of a deposit. Well, that’s my opinion anyway.

    Best of luck,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of FergusGartlanFergusGartlan
    Member
    @fergusgartlan
    Join Date: 2002
    Post Count: 7
    June 4, 2002 - 9:05 am

    Thanks Darren and Steve,
    Have started wrapping my 1st property, and made an offer on the 2nd.
    Yeehaa!

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