What to check before buying commercial property?

Share your concerns & ideas about commercial property loans in Australia.
iamsam
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Joined: Mon Feb 15, 2016 8:11 am

What to check before buying commercial property?

Postby iamsam » Mon Feb 15, 2016 10:11 am

Hi home loan forum,

I was told that this was a great place to ask for tips and advice on all things property and mortgage related. Well, I've been saving up to buy a commercial property in Port Lincoln and I've researched things quite a bit I suppose, but I still think I may have missed out on many considerations.

Can anyone give me some tips or things not to miss out on checking before I actually get down to buying a commercial property?

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Otto Dargan
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Re: What to check before buying commercial property?

Postby Otto Dargan » Mon Feb 15, 2016 12:13 pm

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
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iamsam
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Joined: Mon Feb 15, 2016 8:11 am

Re: What to check before buying commercial property?

Postby iamsam » Mon Feb 15, 2016 5:18 pm

I hadn't even considered whether or not the lenders would accept the property! The property is actually a warehouse and it's nearby the city. I'm actually expecting the surrounding businesses to make use of it so tenancy and all isn't a problem. Warehouses are acceptable, aren't they?

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Otto Dargan
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Re: What to check before buying commercial property?

Postby Otto Dargan » Tue Feb 16, 2016 8:50 am

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

iamsam
Posts: 5
Joined: Mon Feb 15, 2016 8:11 am

Re: What to check before buying commercial property?

Postby iamsam » Tue Feb 16, 2016 2:42 pm

Thanks for that, Otto. I think I've saved up enough for a 20% deposit so getting a 10% deposit and then borrowing 70% doesn't seem like a problem to me. I'll call your office by the end of the month to discuss my loan needs. Bye.

boomerang
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Re: What to check before buying commercial property?

Postby boomerang » Fri Mar 25, 2016 11:05 am

Hi everyone, I'm also planning on buying my first commercial investment property. I have a 30% deposit just in case I can't borrow more than 70% but what I actually want is to get a low interest rate on a commercial loan. What should I do to help me get a lower rate?

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Otto Dargan
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Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: What to check before buying commercial property?

Postby Otto Dargan » Fri Mar 25, 2016 3:17 pm

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

boomerang
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Joined: Fri Mar 20, 2015 9:09 pm

Re: What to check before buying commercial property?

Postby boomerang » Sat Mar 26, 2016 8:10 am

I think I'm good on more than half of that… I'll have a chat with one of you guys to discuss this in more detail. Thanks!


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