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The answer to this may surprise you....
the subject of deposit is often misunderstood.
The answer to how much deposit do I need is... none Legally
However will a vendor sell a property to a buyer that doesn't pay a deposit.
Officially a deposit is just an act of goodwill, a deposit says "I am serious about buying this property" so I am willing to put down X amount to show you my good will.
So usually the larger the deposit the "stronger" the contract.
Some buyers may think, because it's an investment that I'm buying, I want to finance as much as I possibly can, so I only want to leave a small deposit.
TIP: The deposit you put down doesn't need to relate to how much you finance.
If the financial institutions say they will lend X amount than you can retreive any surplus deposit that you have put down back at settlement.
E.G. You put down $30,000 on a $200,000 property the bank promises to lend you 95%.
At settlement you can have $20,000 refunded because the bank will lend you $190,000 so the only shortfall is $10,000.
If you would like any help with this click here to contact us.
Usually most investors want to borrow 100% + costs, (if the financial institution agrees there's enough equity in the buyers other assets) for maxiumum tax advantages and the opportunity of not having to take anything from their own pocket.
So do they buy without putting down a deposit? of course not.
The more professional investor usually puts down a large deposit to show the seller that they are very serious about buying and that they are financial stable with little chance of the sale not proceeding due to not being able to get finance. (another reason why pre approval is strategically intelligent).
The investor then gets the deposit refunded back to them at settlement and uses the financial institutions money to fund 100% of the purchase and costs.
Of course this results in the best of all worlds, the seller may choose this contract over another, simply because this contract has a stronger deposit and the buyer has pre approval with little chance of not getting finance from a financial institution, and the buyer gets the deposit back at settlement allowing them to fully finance the property without taking any cash from their own pocket.
TIP: When putting an offer on a property remember:
The vendors fear is that a contract may not proceed due to a lack of getting finance,
This means it will be a waste of the sellers time.
It may create a major interruption to plans the seller has made for the future.
It means that after stopping the marketing of the property because the sellers thought it was sold, they now have to start again.
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