# 002 - Can I pay $1 deposit ?

 I wanted to pay a $1 deposit on a recent deal. While this is legal and possible... it's not recommended.

 When you are buying a house, the deal is made up of a few different components. And today I am looking at the deposit.

A 10% house deposit is often standard on Sale & Purchase Agreements.

I will almost always cross this out and put in my own number. In this example of a recent offer it was $23,000.

Why $23,000 ???

This was slightly above what the real estate agents commission would have been.

And that is important.

(just to be clear - I'm talking about the deposit on the sale & purchase agreement. This is different to the % deposit that the bank requires - this is usually 30%)

The real estate agent works for the vendor, and therefore gets paid by the vendor.

So if your deposit is less than the real estate commission, the agent may need to wait until settlement to receive their cheque. And seeing the agent (somewhat) controls this negotiation, they may well be pushing for a deposit to at least cover their fee.

In this example the purchase price was around $600,000 - so the standard 10% deposit would have been about $60,000.

This comes out of my own cash reserve, so the lower the better - for me.

So why not just $1 reserve ?

Well there is no rule saying it can't be $1. 

But I come back to the basics of property investing - a lot of the tactics depend on the state of the market.

In a tough buyers market where nothing is selling, then a $1 deposit would make sense and may be used.

But in a hot market, where everything is selling fast, forget about it.

Your offer needs to be appealing to the vendor, and to a certain extent, to the real estate agent.

I tend to go as low as I can, but keep it about 3% - 4% to cover the real estate agents commission.

I don't think the deposit amount is nearly as important as the total purchase price, but can be used as part of a good negotiation strategy.

The deposit makes up a small portion of the Sale & Purchase Agreement - a key contract to master on your property investing journey.

If you are at the beginning of your property investing journey - mastering the Sale & Purchase agreement is key.

• How much deposit?
• What clauses?
• Can I do it electronically?
• Why putting in 2x offers on the same property may be the best move

I created a short course, sharing my knowledge around mastering the Sale & Purchase Agreement.

Get it for just $49 - here