Commercial Property Loans
Commercial Property Loans cover most commercial funding options and are available in Full Doc, Low Doc and Lease Doc. All products are available in clean credit and credit impaired. Maximum Lending to 80% LVR on both purchases and refinance of standard Commercial Property. Bad credit options to 75% LVR.
Funding for property purchases, refinancing, equity release, cash out, working capital, paying out tax debts and business debts.
Commercial Properties need to be in high population areas (capital Cities and Major Regional Towns with populations over 20,000 people).
Acceptable Commercial Property Securities include:
- Retail Shops.
- Commercial Offices.
- Industrial Units.
- Factories.
- Shopping Centres.
- Office Buildings.
- Warehouses and Workshops.
- Mixed Residential & Commercial Use.
- Medical / Professional Suites.
- Residential Unit Blocks.
Types of Commercial Loans available:
When you purchase a commercial property, unlike residential, you do not come under the same credit laws. This allows for other options that are not available for Residential Properties.
- Full Doc Commercial Property Loans: Where all income verification is required similar to a home loan and is generally the lowest rate loan. We can lend up to a maximum of $5 million to 70% LVR and to $4 million to 80% LVR. The minimum deposit for a commercial loan is 20% plus costs.
- Low Doc Commercial Property Loans: This is where either your Accountants verifies your income or you can use BAS Statements or Bank Statements. This is only for Self Employed Applicants with registered ABN’s and in Business for 12 months or more. We can lend up to $4 million to 75% LVR and to $3 million to 80% LVR.
- Lease Doc Commercial Property Loans: Are designed for investors with rental producing commercial properties. The Lease Doc product is where servicing is established by income from a quality third party lease servicing the debt. No need to provide financials or tax returns or confirmation of other assets or other liabilities. We can lend up to $4 million to 75% LVR and to $3 million to 80% LVR.
- Bad Credit Commercial Property Loans: This type of loan is designed for Applicants that have past or present credit impairments on their credit file. We can lend up to $2 million to 75% LVR on both Full Doc and Low Doc Commercial Loans.
- SMSF Commercial Property Loans: A Self Managed Super Fund (SMSF) Loan is designed to provide loans to authorised Australian Self-Managed Super Funds. Only available for the purpose of purchasing or refinancing commercial investment property. Available to PAYG and Self-Employed Applicants where income verification is only required on the SMSF. We can lend up to $4 million to 75% LVR and to $3 million to 80% LVR on clean credit. For Credit Impaired we can lend to a maximum of $2 million to 75% LVR.
- Retained Stock for Residential and Commercial Property Loans: Allows for the refinance and equity release on both Residential and Commercial securities to be retained post completion. Up to 80% LVR on Residential Properties currently rented and to 70% LVR for Commercial Properties.
- Highest and Best Use for Residential Investment Properties: Allows you funding for acquisition of Residential Securities assessed as suitable for future developments. We can lend up to a maximum 80% LVR on up to 4 seperate dwellings and 65% LVR on Vacant Land.
Capital Gain vs Higher Yields
Some people invest in property for capital gain and some for a regular income. You need to leverage Capital Gains against Higher yields as it difficult to find property that will offer both.
While the Australian residential market performs in a rather predictable fashion in terms of capital gain, this is less predictable for commercial property. Residential property on average is said to double every 7 – 10 years. Looking back over Australian property prices during the last 50 years this rings true time and again. However in recent times the residential yields have fallen and are in some shopping strips as low as 3%. The more land component the property has and the stronger capital growth it expected to achieve. Moreover the lower it seems to perform in terms of rental yield.
Commercial property is not all the same. There are different sectors such as retail, office and industrial property.
Commercial investment is generally valued in terms of the yield it offers. However if the property has mixed use potential, a strong land component and is located in busy inner suburb shopping strip, you should be able to achieve both a mix of strong capital growth, and a reasonable rental yield. Specialised securities such as “Nursing Homes”, “Petrol Stations”, “Kinder Gardens” and the like can offer an excellent income stream while tenanted but if the tenant leaves may drop substantially in their value and could be difficult to re-lease. Therefore, commercial lenders will only offer 50-60% mortgages to purchase these.
The lower the LVR, the higher the risk.
Tax Position
Commercial property has traditionally been used to reduce people’s tax burden. Commercial property can provide greater tax deductions than residential, through higher depreciation allowances. Tax advantages are even better when commercial property is bought through property trusts.
Strength of Lease in a Commercial Property v Residential Property
The nice thing about investing in commercial property is that the tenants pay your outgoings and the leases are longer. You may have a tenant stay for 5, 10 or 15 years. However once a tenant leaves it may take several months or even years to find a new one.
With Residential investment leases are typically shorter. On average tenants stay in their rental property 12-24 months. It is much easier to find a new tenant (a matter of weeks). You pay all outgoings including rates, taxes and body corporate fees.
Research Investigate and Analyse
Before making any decision make sure you do your homework. You need to understand how commercial property market works in your city. Research the different sub-markets, areas, property types and zonings. Analyse the required investment, potential yield and expected capital growth. To make an informed decision you must understand your market and it’s inherent risks.
