About Commercial Properties in 2023 (Australia)

Looking to finance a Commercial Property? Here is a short guide to get started

Before you Finance a Commercial Property

When buying a commercial property, banks often see commercial properties as slightly higher risk than residential loans due to how commercial properties are used. Banks will look for important factors in commercial properties to evaluate the risk associated with the loan: location, type of commercial property and whether there are any existing tenant contracts.

Before you purchase a commercial property, most lenders will require that a licensed valuer value the commercial property to give assurances to the bank on the property’s value.

Commercial properties are generally higher in price than the average residential property within the same area; most within Perth cost more than $ 1 million, while cheaper properties, such as smaller office and warehouses, range from $450k onwards.

Higher Returns

In general Commercial properties do offer a more attractive rental yield compared to residential properties, but on the flip side, they can have a longer vacancy period.

Longer Lease Terms

Commercial properties generally require much higher deposit amounts, such as 25 to 30% and a shorter loan term of 15 years. But in recent years, lenders have gotten more competitive, lowering deposits to 20% and extending loan terms to 30 years; terms and conditions apply.

Lending environment in the commercial space for loan < $2m has gotten easier as well where you only need to provide 2 BAS (if you are a business) instead of the full financials and tax returns and payslips if you are a PAYG

Assessing your Loan Serviceability

To assess whether your income could service your loan, banks do not accept proposed rental if the property is empty. Just like residential properties, if you have a PAYG income, you will be required to show your payslips and tax statements and if you have a business the latest two copies of your Business Activity Statements should be sufficient.

If you have an ongoing tenancy contract with existing tenants, this will also show that the property is generating income until the lease expires.

There you have it. If you are interested in getting a commercial property, whether it is for investment or for your own business, speak to us for a free consultation!

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