What to check before buying commercial property?

Share your concerns & ideas about commercial property loans in Australia.
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Otto Dargan
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Re: What to check before buying commercial property?

Post by Otto Dargan »

Hello iamsam. Welcome to the forums.

There are always a lot of considerations before buying commercial property, especially since you're likely to lose money if you skimp out of them.

It's good that you're researching things further because that is what will give you the edge when you actually get down to buying. If you haven't considered these already, here are a few things to think about:
  • Your affordability: To buy larger commercial properties, you'll generally need to have a lot in equity.
  • Familiarity with the area: If you're not too familiar with the area, you may miss out on considering some major profitability issues that can arise down the track .
  • Tenancy situation: Strong corporate or government tenants with long term leases can be a great find. If the area has higher vacancy rates, you may want to focus on finding some tenants first.
  • Acceptable security property: If your security property isn't acceptable to the lenders, your commercial property loan application may be declined. Lenders prefer properties that are easily marketable and in a good location such as a regional centre.
  • Loan features: Think about what loan features you will actually use and discard any that you won't. Deciding on this can help you meet your goals much quicker further down the line.
Also, please speak with a professional financial advisor before you buy the property.

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

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Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: What to check before buying commercial property?

Post by Otto Dargan »

Hi iamsam,

Yes, warehouses are an acceptable commercial property type. However, you should note that you may be able to borrow up to 70% of the property value only for freehold titles.

Lenders are often strict with their requirements when it comes to commercial property loans for buying warehouses. Your maximum loan term will probably be 20 years and if you're borrowing more than $5 million then the application will be assessed on a case by case basis.

If you were to run business in the warehouse then you'd also need to have a business plan.

Our mortgage brokers specialise in commercial property loans and we have dealt with many loans to buy warehouses. You can discuss your situation and loan needs with one of our mortgage brokers directly by calling us on 1300 889 743 or by enquiring online.

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

User avatar
Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: What to check before buying commercial property?

Post by Otto Dargan »

Hi boomerang,

Many lenders base their commercial loan interest rates on the level of risk that your loan application poses on their risk matrix, which generally considers the following:
  • The location, condition and market appeal of the security property.
  • The current state of the local property market as well as the future state.
  • Your ability to meet the mortgage repayments, the Loan to Value Ratio (LVR) and your asset position.
  • Your business track record or management experience.
  • Your property portfolio and the level of diversification.
  • The time left on the lease.
The above is general information only and there are other factors that lenders consider and may assess as a risk.

Please give us a call or check out our website to learn more.

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

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