Why use VIP Finance broker?
The pricing, lending policies and requirements for Commercial Property loans vary widely, and many of the terms can be negotiated. When a loan is submitted by a broker, the lenders know they need to be competitive with a borrower using a broker’s expert advice. Individuals, registered companies, trusts and self-managed superannuation funds all can benefit greatly from our professional support for securing a good deal.
We evaluate the best suited loan options and discuss Commercial Property loan strategies with you depending on whether you:
- Buy as an investor directly.
- Buy as an investor through your SMSF (Self-Managed Super Fund).
- Buy as a Business Owner for your business operations.
Buying Commercial Property as an Investor
Possessing many similarities with Residential Property, Commercial Property differences include:
- GST: 10% of the purchase price, which you might be able to claim/get a refund.
- Longer Lease Terms: usually a minimum of 5 years.
- Less Ongoing Costs: unlike Residential Property, the lessee/tenant may pay for many of the expenses/outgoings such as Strata fees/Owners Corporation Fees, water rates, council rates, repairs and maintenance. (Exceptions to some tenants, such as a tenant under retail premises lease is not liable to pay outgoings except where they are detailed in the lease).
Buying Commercial Property for your Own Business Premises
Owning your business premises by buying commercial property:
Buying in your BUSINESS’S name
- The property becomes an asset of the business;
- the cash flow from your business will be used to repay the loan.
- Good for building equity in the property which you can use to secure loans for other business purposes in the future.
Buying in your OWN name or through a SMSF (Self-Managed Super Fund)
- Your business will lease the property from you.
- You benefit from the Capital Gains of the property, building up your wealth
- Good for providing your business the peace of mind of securing your business premises location and the freedom to alter the premises.
Standard Vs Specialised Security for a Commercial Property Loan
For Commercial Property Loans, standard security in the form of Standard Commercial Properties is generally the best for securing the loan. Whereas Specialised Commercial Properties need a bigger deposit and require more detailed valuation and risk assessment by the lender
Standard Commercial Properties include:
- Residential (houses, units, townhouses, block of flats).
- Retail Spaces and Shopfront.
- Offices
- Factories and Warehouses.
- Standard Commercial Properties in a good location zoned as residential commercial, industrial or mixed.
Specialised Commercial Properties include:
- Land Subdivisions, Commercial Property Developments.
- Restaurants, Pubs.
- Accommodation (hotels, motels etc).
- Petrol Stations, Child care/preschools.
- Supermarkets and Recreation (some lenders may consider these as not specialised)
For multi-use Specialised Commercial properties, the lender may request alternative valuation which can be positive or negative for your case
Commercial Property LVR (Loan to Valuation Ratio)
Generally, for commercial property value up to:
- $1million, you can borrow 80%
- $2 million, you can borrow 75%
- $5 million, you can borrow 70%
- Above $5 million are assessed case by case
- With guarantor, you can borrow 100%
Commercial Property Loans Pros
- More flexibility in income verification options such as using Full doc, Low doc, Lease doc, No doc or Forecasts.
- Capitalised interest is available for development or land sub-division finance.
- Depending on lender, Offset Account feature may be attached to your Commercial Property Loan, so that funds for business cashflow deposited in the Business Offset Account can offset the interest on your Commercial Property loan.
- Possibility in some cases to just buying leasehold, which is the right to occupy and run the business but not the freehold property itself.
Once we have assessed your documents, we’ll negotiate with the lenders to see which are most likely to approve your commercial property loan, with most suitable terms and features at a competitive interest rate. We then present the options to you. During the process, we will liaise with your solicitor and accountant to ensure that their valuable advice is taken into account. Once you accept our proposal, we will then organise a valuation and submit a full loan application for approval, saving you time and potential problems