Commercial Property Loans

There is a wide choice of finance options available to purchase a commercial property, and the options best suited to your needs will depend on whether you are buying as an investor – either directly or through your self-managed super fund – or as a business owner for use in running your business.
Commercial Property Loans

Your Mortgage Choice broker can work with you to pinpoint the finance options best suited to your needs – looking at both the rate and features that can help you manage the loan.

In the meantime, let’s see how a commercial property can work under two different scenarios.

  1. Buying commercial property as an investor, and
  2. Buying commercial property for your business premises.

Buying commercial property as an investor

Commercial property works along similar lines to residential property though with some noteworthy differences that investors should be aware of.

One on hand, a commercial property can deliver both ongoing rent paid by the tenant – or in the case of commercial property, the “lessee”, as well as long term capital growth.

But in many ways the similarities stop there.

Longer leases, the potential for higher returns, but with higher risk

To begin with, when you buy a commercial property, GST (worth 10% of the purchase price) is payable on your investment. You need to factor this into your buying budget.

On the plus side, commercial leases tend to be long, usually a minimum of five years, and unlike residential property, the lessee pays for many of the costs associated with owning the building such as repairs and maintenance. This can make commercial property a lucrative and low cost investment.

On the downside, commercial property is also regarded as a higher risk investment than residential property. While the rent returns can be healthy, commercial properties can also experience longer vacancy periods. Commercial properties can be harder to sell too because the pool of buyers is typically smaller than for residential property, and the more specialised your property, the smaller the market may be.

Factors outside your control

Unlike residential property, where people always need a home to live in, the fortunes of commercial property can very much hinge on the buoyancy of the local economy.

Safeguard against this by investing in a commercial property in an area with a diverse economy, buying a building that may appeal to a broad range of businesses, and reviewing your cashflow to see how well you would handle periods of vacancy.

Professional support is essential for a good deal

Your Mortgage Choice broker can discuss finance options with you as well as explaining loan strategies to own commercial property including through a self-managed super fund.

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Buying commercial property for your business premises

There’s a lot to be said for owning your business premises, and an investment in commercial property can let you do just that.

If you run your own show, chances are you know just how important it is for your customers to associate your venture with a particular patch of turf.

Leasing rather than owning your premises can be more affordable in the short term but you simply don’t have the same security of tenure.

It’s a good argument to invest in your own premises, and there are a number of ways to achieve this goal.

Buying in your business’s name

The property becomes an asset of the business and the cash flow from your business will be used to repay the loan. As you build equity in the property, you can use it to secure loans for other business purposes.

Buying in your own name or through a self-managed super fund

You will enjoy the capital appreciation for the property and your business will lease the property from you. You can build up your personal wealth while also providing your business long term access to the premises.

Your Mortgage Choice broker – a source of expert advice

Commercial property can be a complex area, and we recommend speaking with your Mortgage Choice broker to discuss the different financing options and lender requirements. We will work with your accountant to find the right solution for you. As small businesses ourselves, we understand how commercial finance works, and can provide valuable insights to get your loan application across the line.

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