How much can I borrow to purchase a petrol station?

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G-Rob
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How much can I borrow to purchase a petrol station?

Postby G-Rob » Tue May 12, 2015 7:13 am

Good morning experts!

I inherited a service station from my father a few years back and I’ve been running it ever since. I’ve learnt a lot about how to operate it efficiently and the profits have never been higher.

That’s the reason I want to purchase another petrol station. I want to take out a mortgage for it. Can anyone here tell me how much I can borrow?

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Otto Dargan
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Re: How much can I borrow to purchase a petrol station?

Postby Otto Dargan » Tue May 12, 2015 11:13 am

Hi and welcome to the forums G-Rob.

If you are taking out a loan to purchase a service station, then you may be able to borrow up to 60% of the property value. Although if you are planning to take out a loan over five million dollars, then the lenders may consider evaluating your application in detail before approving it.

It should be noted that you may need a convincing business plan and profit forecasting for the service station to get approval on the loan.

Most lenders tend to prefer a borrower who has experience and a strong track record in operating a business in the same industry. Since you are already in the game, it may be a lot easier for you to qualify for finance for a new service station compared to a novice investor.

This is because lenders can be confident that you may be able to operate a profitable business and will not default on your loan based on your past experience.

Cheers,
Otto
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G-Rob
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Joined: Fri Jul 19, 2013 2:42 am

Re: How much can I borrow to purchase a petrol station?

Postby G-Rob » Tue May 12, 2015 4:41 pm

That is so good to hear. Thanks for the info! I’m planning to lease a land to establish the service station instead of buying it. Do you think it’s a good plan?

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Otto Dargan
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Re: How much can I borrow to purchase a petrol station?

Postby Otto Dargan » Wed May 13, 2015 12:35 pm

Hi G-Rob,

If you own just the business of the service station and are leasing out the land, then you are said to be in a leasehold arrangement. In this situation, the lenders will lend to you only against the profitability of the business.

On the other hand, if you buy the land as well as the business, then you may be able to get a loan at a higher loan to value ratio (LVR). The reason is that the land itself is a real estate asset and may be taken as security, along with the profitability of the business, when the lender values the commercial property.

For more information on service station loans, you can have a look at our website. If you want to speak with one of our mortgage brokers then you can give us a call on 1300 889 743, or fill in our free assessment form and one of our mortgage brokers will contact you instead.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

G-Rob
Posts: 34
Joined: Fri Jul 19, 2013 2:42 am

Re: How much can I borrow to purchase a petrol station?

Postby G-Rob » Wed May 13, 2015 4:22 pm

Thanks for the tip, mate! I appreciate it. I definitely want to buy a service station but I need more guidance. I believe you can help me with the loan process so I’ll be giving you a call within the next few days. Talk to you then.

bigeddie
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Re: How much can I borrow to purchase a petrol station?

Postby bigeddie » Wed May 27, 2015 2:23 pm

Hello! I’m also thinking about taking out a mortgage to purchase a petrol station. And thanks to this thread, I got to learn a lot about it. It seems that G-Rob here has been operating a service station and already knows a great deal about it. I’m new to this so I’ve got to learn a lot more.

I’m planning to buy an already established service station but I’ve heard that some service stations are contaminated. How do I know if the petrol station I want to buy is contaminated?

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Otto Dargan
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Re: How much can I borrow to purchase a petrol station?

Postby Otto Dargan » Thu May 28, 2015 10:21 am

Hi bigeddie,

Many of the items for the operation for a service station are underground and may be prone to contamination.

If a petrol station has ever had contamination problems, then it must have been recorded in the Contaminated Land and Environmental Management Registers (CLR/EMR) as per the Environmental Protection Act 1994.

You may check the records to find out whether contamination has been a problem in the past. You may also check the contract of sale to ensure that a satisfactory tank and line test has been undertaken.

It should be noted that although a piece of land is not listed on the CLR/EMR, it does not necessarily mean that the land is free of contamination. You must undertake a complete test of the soil to ensure that it is safe to operate a service station on it.

If you take a soil test prior to signing the lease of the land settlement, and it is found that the soil is contaminated, then you do not have to be liable for the removal of the contamination.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

bigeddie
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Joined: Wed Jul 03, 2013 8:30 pm

Re: How much can I borrow to purchase a petrol station?

Postby bigeddie » Thu May 28, 2015 3:11 pm

That doesn’t seem too hard. I’ll make sure that I do all the necessary tests before signing anything. With that worry out of the way, I can focus on the application process. I’ll ring you after I do all the tests on the petrol station that I’ve got my eye on. Cheers!


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