All Topics / Help Needed! / How about the Deposit

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  • Profile photo of Mudassar HussainMudassar Hussain
    Member
    @mudassar-hussain
    Join Date: 2010
    Post Count: 6

    Hi Every one,
    This is my first post here, and i need a bit of help to understand a basic math. Yes call me Dumb. but help me. I just finished the book Steve wrote about 130 properties. By far this is the most interesting and valuable book that i read. But like every other book, i couldn’t find a simple step one process. It is a great tool to use after buying the property. but for me the only real challenge always been the deposit. and i am disappointed that this book doesn’t mention anything about deposit.lets say, for 20%deposit, you need at least 50,60 —100K. Now if you can save that much money, then you can buy the property. Now for equity to increase you need 3-5 years. and working in a job or business and after living expenses, how many 60,000S or 100,000S can you save to keep going on to buy the property. Even that property is cashflow positive and giving you $50-$60 per week but that is still over 2400 per year,
    The other option could be to borrow money from other investors, but then Steve wouldn’t show all the positive cash flow to himself .
    So you get it I am confused, tell me how to come up with 200,000 to 300,000 every year to put deposit in to property. still that would be 4-5 properties a year, how to come up with 130, I don’t KNOW?
    HELP ME

    Profile photo of crjcrj
    Participant
    @crj
    Join Date: 2004
    Post Count: 618

    From reading Steve's book in its first edition I recall 2 methods:

    a. as a property increased in value, selling it and reinvesting in multiple properties in an overlooked area – did he call this Divide and Multiply?

    b. wrapping: so that the purchaser under the wrap paid a deposit which could then be used by the vendor in another transaction

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    Hi matie

    OK a couple of things to think about:

    You don't have to have 20%.  It is possible to instead pay less (eg 10%) and pay mortgage insurance.  It is not a good idea to pay too little, or 0%, because you then have problems if you need to sell the property and its value has dropped to less than what you owe the bank for it.

    Also notice that in Steve's book, many of the properties he bought were in regional areas (such as Ballarat in Victoria).  The point is that the price of many of the properties he bought was in the order of $30k -> $50k.  So it is much easier to come up with 20% for this because it is only $6k or so.  Also properties that cost less are not subject to stamp duty.  ( http://www.realestate.com.au/cgi-bin/rsearch?a=calc&jar=StampDuty )

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of vsdabhivsdabhi
    Member
    @vsdabhi
    Join Date: 2009
    Post Count: 19

    Hi Mudatsar,
    I had also the same question before 2 years. I got advice from an another forum called somersoft property investment forum. First of all, A biginer should start with a small investment in property if he does not have much deposit. You can buy a cheap property say $200K to $250K a unit in a suberban area. You need a 10% deposit plus other expences like stamp duty, lawyer fees etc about 5%. If you buy a $200K property, you need $30K total deposit.
    If the property is your PPOR you won't pay stamp duty and Govt wil give you a FHOG of $11K. So you will need only 10K to 15K deposit.

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539
    vsdabhi wrote:
    If the property is your PPOR you won't pay stamp duty

    Sadly this is not true in all states :-(  Refer here ; http://www.realestate.com.au/cgi-bin/rsearch?a=calc&jar=StampDuty

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of Mudassar HussainMudassar Hussain
    Member
    @mudassar-hussain
    Join Date: 2010
    Post Count: 6

    Thank you for your reply,
    After the first property, then i am not first home owner, so i wont get the grant, and i have to pay the stamp duty. so how do i manage the second deposit, and third or forth.
    Let say, i want 5 properties in a year, to follow Steve’s formula. my first property hasn’t grown enough equity to use, and i don’t have enough money saved up .

    So how to raise money for the deposit?

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    You could look at wrapping the property when the purchaser will pay to you the deposit and you can use this however you still need to cover your acqusition costs.

    Other than this if you dont have sufficient equity in your current property you probably wont do it.

    Richard Taylor | Australia's leading private lender

    Profile photo of howardcmhowardcm
    Member
    @howardcm
    Join Date: 2008
    Post Count: 65
    Mudassar Hussain wrote:
    Thank you for your reply, After the first property, then i am not first home owner, so i wont get the grant, and i have to pay the stamp duty. so how do i manage the second deposit, and third or forth. Let say, i want 5 properties in a year, to follow Steve's formula. my first property hasn't grown enough equity to use, and i don't have enough money saved up . So how to raise money for the deposit?

    I dont think you have the knowledge or experience to start out with 5 properties a year. You can do a reno to increase equity, or you have to buy under market value.

    I brouhgt my 1st IP about 10 months ago for under market value. The bank valuation came in $45,000 higher then the purchase price. It has now gone from a purchase price of $340,000 to $427,000 in the space of 10 months allowing me to start looking for IP # 2. It gives me about $40,000 of accessible equity to use as a deposit on my next purchase

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