HOW DO I BUY/INVEST IN COMMERCIAL PROPERTY?
Looking for a commercial property for an investment or for your business operations? No need to be scared off; this type of investment may be more within your reach than you think.
In general, the process is very similar to buying residential property with the key differences being the requirements for larger deposits, reduced repayment terms, slightly higher fees and interest rates. We are here to help you navigate through what might feel like unfamiliar territory and ensure a suitable result.
We know you have lots of questions. So, we’ve provided answers to the most common ones here.
Good question. We will provide you with the specifics over the phone before we meet, but generally the banks ask for:
- Proof of income
- A deposit backed by a proven savings history
- A good credit history (we can still help if you don’t)
Commercial lending is typically more restrictive to residential lending and that is reflected in a higher deposit requirement. At least 20% plus purchase costs will be required for purchase but in some cases utilising residential property as security for the purchase can reduce this.
We have a calculator to give you an idea but we will assess your situation and confirm this for you. Generally speaking, the more money you earn and the less debt you have, the more your capacity to borrow will be. Each lender will be different.
As well as the normal fees associated with the purchase of property like stamp duty and conveyancing you will need to plan for more expensive bank related costs including valuations, application and settlement fees. It is also worth noting that given the inherent risk in commercial property ownership you should expect to pay a higher rate of interest relative to residential property.
Variable interest rates move, normally relative to changes in official interest rates set by the Reserve Bank of Australia. A variable rate loan is beneficial when rates are on the decline. Fixed interest rates don’t move. You can fix your rate for a particular period of time, normally between 1 and 5 years, but it’s most beneficial when rates are on the rise.
You should expect 15 to 20 years in repayment terms. This can be increased in some cases when utilising residential security to facilitate the purchase.