Hello home loan forum,
My partner and I have been thinking of investing in a commercial property. We researched for quite a while before we found a great investment opportunity in Adelaide. We decided on using our SMSF to get a mortgage to finance the purchase.
The thing is, we don’t know how the banks will react to different commercial properties. As we’re not certain about the type of property we’ll be investing in right now, we’d appreciate it if anyone could help shed some light on this matter. Thanks in advance.
Property types for SMSF commercial loan
- Otto Dargan
- Mortgage Specialist
- Posts: 7730
- Joined: Sat Sep 06, 2008 5:55 pm
- Location: Sydney, Australia
- Contact:
Re: Property types for SMSF commercial loan
Hello JohnJohn. Welcome to the forums.
If you take out an SMSF commercial loan to invest in a standard commercial property then you need to know that the lenders tend to prefer certain property types over others.
Here is a list of commercial properties that most lenders tend to finance relatively easily:
Cheers,
Otto
If you take out an SMSF commercial loan to invest in a standard commercial property then you need to know that the lenders tend to prefer certain property types over others.
Here is a list of commercial properties that most lenders tend to finance relatively easily:
- Residential properties and offices.
- Factories and warehouses.
- Retail shops and restaurants.
- Rural properties and farms, although some conditions may be applicable.
- Development sites.
- Vacant land, in some cases.
- Properties that are not in good condition.
- Single use securities such as pubs, petrol stations, and day care centres.
Cheers,
Otto
Re: Property types for SMSF commercial loan
We’ve considered investing in either a restaurant or an office. We’ve also considered a petrol station but it seems highly unlikely now. We have one more question - how much will we be able to borrow?
- Otto Dargan
- Mortgage Specialist
- Posts: 7730
- Joined: Sat Sep 06, 2008 5:55 pm
- Location: Sydney, Australia
- Contact:
Re: Property types for SMSF commercial loan
Hi JohnJohn,
With an SMSF loan, many lenders may allow you to borrow up to:
All of this seems to be quite conservative on the side of the lenders. This is because:
Cheers,
Otto
With an SMSF loan, many lenders may allow you to borrow up to:
- 70% of the value or 70% Loan to Value Ratio (LVR) of a commercial property.
- 80% LVR of a residential property.
- $10 million. If you want to borrow even more then you may be able to do so on a case by case basis.
All of this seems to be quite conservative on the side of the lenders. This is because:
- The mortgage is a non-recourse loan. This makes it harder for the lenders to recover their money.
- The security property is a commercial property, which means that it may take longer to sell.
- In comparison to others, this is a relatively new area of lending. Thus, there is a possibility for the existence of other unforeseen risks.
Cheers,
Otto
Re: Property types for SMSF commercial loan
Thanks a lot for the great info, Otto. We didn’t think your website would be so amazing. It helped us learn a lot more than what we’d learnt in the past few months of researching ourselves! For now, we’ll continue saving up and after we’ve come with a decision as to where to invest, we’ll give you a call to discuss things further. Good night
Re: Property types for SMSF commercial loan
Hi there,
I’ve also been thinking of investing in a commercial property but I’m not too sure about using my SMSF just yet. Right now, I’m more concerned about the loan term that I may be allowed. I’m thinking of getting a loan term of at least 25 years. Will I be able to get it?
I’ve also been thinking of investing in a commercial property but I’m not too sure about using my SMSF just yet. Right now, I’m more concerned about the loan term that I may be allowed. I’m thinking of getting a loan term of at least 25 years. Will I be able to get it?
- Otto Dargan
- Mortgage Specialist
- Posts: 7730
- Joined: Sat Sep 06, 2008 5:55 pm
- Location: Sydney, Australia
- Contact:
Re: Property types for SMSF commercial loan
Hi everlong,
In most cases, the term of your commercial loan may be determined by the security that you offer to the lender. You may be able to get a loan term of up to:
Cheers,
Otto
In most cases, the term of your commercial loan may be determined by the security that you offer to the lender. You may be able to get a loan term of up to:
- 30 years if your security property is a residential property.
- 20-25 years through a select few lenders if you offer a commercial property as security.
- 15 years for most commercial property loans.
- 5-7 years if you are taking out the loan for buying commercial equipments.
Cheers,
Otto
Re: Property types for SMSF commercial loan
That’s good news for me! Thanks for your help, Otto. You seem like someone who knows his stuff. For now, I’ll check out your website to learn more. Once I’ve got all the info I need, I’ll call your office to schedule an appointment with one of your brokers to discuss things in more detail. Goodbye.