Commercial property loans

Commercial property loans are generally different to that of residential property in terms of interest rates, Loan to Value Ratio (LVR) thresholds and other lender policies.

Commercial property is considered a more risky asset class compared to residential property as vacancy periods can be quite long. However, commercial property  is typically higher in yield. This asset class may be more suited to those who are in or approaching retirement or for business owners to hold their business premises in their self managed super fund (SMSF). Other benefits of commercial property are that it is usually subject to long term lease (e.g. 10 years). The tenant is usually responsible for most of the outgoings, such as council rates, insurance, repairs and maintenance.

What types of Commercial property are acceptable security for a commercial property loan?

Commercial property loans includes finance for:

• Property developments
• Land subdivisions
• Residential unit blocks
• Boarding houses
• Accommodation (hotels, motels, resorts, bed & breakfasts, caravan parks, backpackers)
• Taverns / Pubs / Hotels
• Restaurants
• Aged care centres
• Child care / preschools
• Offices
• Strata offices and office blocks
• Professional rooms and suites
• Function / reception centres
• Shops (retail premises, including mixed use)
• Shopping centres
• Car yards
• Warehouses
• Factories
• Industrial sites
• Petrol stations
• Farms and other rural properties

Not all lenders will accept every type of property for security.

Which legal structure are able to borrow for commercial property?

Acceptable legal structures for commercial property borrowing are:

• Individuals
• Companies (private and public)
• Trusts
• Partnerships

What Loan to Value Ratio can I get on a Commercial Property loan?

The loan to value ratio (LVR) available for a commercial property loan will depend on your situation. If you have full documentation of your income you may be able to borrow up to 80% in some circumstances. If you have less documentation the loan to value ratio available will be less 75%, 70% or down to 65%. It will also depend on the amount of money that you are borrowing. Typically the less documentary evidence that you have of your income the lower the LVR that you will be able to have.

Furthermore, some property types are considered higher risk than others and the lenders may require a lower LVR for those property types.

Contact an Oak Laurel mortgage broker to find out about your commercial property funding options.

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