What is a commercial property loan?

Successful commercial property investments require a solid understanding of complex market factors such as commercial property loans, property management, leasing arrangements and, as with any property investment, a healthy understanding of the risks involved.

Once you’ve weighed the pros and cons, looked at more commercial properties than you care to remember and finally made the decision to invest, it can seem like the hard work has all been done. However, this is only the tip of the iceberg. With any kind of investment property, commercial or otherwise, there are some factors to consider when deciding on your commercial property loan.

Luckily for you, our loan expert are here to do the hard work for you. Our experts will work tirelessly to make sure we find the right-fit commercial property loan for you, as well as a suite of financial planning solutions for you. We promise to go that extra mile for you, looking beyond the typical fixed and variable rates offered by most major banks to ensure we secure you the best commercial property loan to suit your unique needs.

Our team of highly experienced commercial property loan experts will first analyse what options are currently available on the market; then we’ll offer you a tailored solution based on your personal circumstances and life goals. We are not going to pretend that this option is the easiest, but we’re not here to give you the easiest, we want to deliver you the most suited product that will make your dreams reality.

When it comes to commercial property loans there are a wide variety of options available and, if you’re familiar with other types of loans such as residential home loans, these options work in much the same way. As an investor, there are a variety of loan rates to choose from, from fixed rate to variable, split rate, principal and interest rate or interest-only loans. If these terms don’t mean anything to you, or you want to brush up on your property loan knowledge, head over to our Investment Loans page for an overview of what each term means to help you understand what this means for your commercial property loan.

One key difference when it comes to commercial property loans is that you usually need a larger deposit to secure your mortgage approval. As a rule of thumb, you’ll want your deposit to be at least 30% of the purchase price. If you’re already a homeowner, your investment strategist might recommend you take out a line of credit loan where you offer your home as collateral in exchange for being granted a lower rate loan.

Things to know about a commercial property loan

Before you set your heart on a commercial property loan, our loan experts recommend you take the following insights into consideration:

  1. Leasing periods: in the world of commercial real estate the rental period is typically longer than in the residential property space. This is a benefit for investors as gives you greater certainty regarding rental income and commercial properties ordinarily experience less tenant turnover. However, the flip side of this is that vacancy periods can be longer, so this is something to keep in mind.
  2. Be aware of your tax obligations: A Goods and services tax (GST) applies when you buy a commercial property so when you’re forecasting your finances make sure you budget for 10% on the property’s purchase price. As an investor, you can claim the GST back. However, this is something you need to keep in mind to ensure you have enough cash flow available. Another item to be aware of is that unlike residential property, the costs of maintenance is covered by the tenant. This will save you time and money as an investor, but it also means more of the rent you receive goes towards your profit which again, will have an impact on your tax obligations.
  3. Is commercial property the right fit for you? Commercial property is often regarded as a higher risk investment when compared to residential property. This certainly doesn’t mean it isn’t a good investment option, but it does mean that having a property investment strategist, whose advice you trust, is paramount. With this type of investment, especially, we recommend you consult with an expert who can look at your financial circumstances, goals, and willingness to take on this higher risk investment.