Commercial Property Investment Loans

It is finance to buy a commercial property you lease to a tenant, rather than premises your own business occupies. You are the borrower, and a third-party tenant pays the rent that helps service the loan. Because the income depends on that tenant and the lease behind them, lenders assess the property, the lease and the tenant together, which is why investment deals are priced a little differently to owner-occupier ones.

Most investors I work with are either adding a commercial property to a residential portfolio for the yield, or a business owner buying a second site to lease out. If the property is tenanted, or you intend to lease it, this is the loan you need.

The short version is that an investment loan leans on the tenant and the lease, while an owner-occupier loan leans on your own business. In practice that shows up in three places:

• Deposit and LVR. Investors usually contribute more deposit and borrow to a lower LVR, because the income comes from a third party rather than the borrower.
• Rate. Investment pricing typically sits a little above the owner-occupier rate on the same property.
• Serviceability. We prove an investment loan largely on the rental income, with your own income behind it, rather than on a trading business in the building.

If you are weighing up leasing versus occupying, our owner-occupier commercial property loans page covers the occupier route, and our commercial property loan types overview compares every structure side by side.

Most income-producing commercial property: office suites, industrial and warehouse units, retail shops, medical rooms and mixed-use buildings. Standard, easily leased assets in metro locations attract the strongest lender appetite and the best terms, while specialised or single-use properties, things like service stations, childcare or hospitality fit-outs, narrow the lender pool and can shift the LVR and rate. The lease and the tenant matter as much as the bricks, so a plain office on a long lease to a solid tenant often finances more easily than a trophy asset sitting empty.

Plan for a deposit from 30% of the property value, with the full range running 30% - 40% depending on the property, the lease and the strength of the tenant. A standard, well-leased property in a strong location sits at the lower end, while a short lease, vacant possession or a specialised building sits higher, because the lender wants more equity behind it. Equity in another property can often form part of the deposit, so the cash you need at settlement is sometimes less than the headline figure.

Up to 70% of the property value for most commercial property investment loans, with the full range running 60% - 70% across different deals. You reach the top when the property is standard and well leased to a quality tenant; the LVR steps down for shorter leases, weaker tenants or specialised premises. Because the rent comes from a third party rather than your own business, investors generally sit a notch below owner-occupiers on LVR, which is simply the lender pricing for that extra layer of risk.

It comes down to two numbers: what the property is worth, and whether the rent comfortably covers the repayments, with your own income behind it. We work from both, applying the LVR the lease and tenant support and testing the rent against the loan.

For a quick read, the borrowing capacity calculator on this page estimates your loan, deposit and repayment in seconds, and our cash flow calculator and yield calculator help you sense-check a specific property. For a figure tied to the actual deal, it is quicker to talk it through with me.

They currently range 6.20% - 10.30%, and where you land depends on the lease, the tenant, the property and your deposit. Investment pricing usually sits a little above owner-occupier rates, because the lender is relying on a third-party tenant rather than a business it can see trading in the building.

I test the live rate across the panel rather than taking one lender's number, since the same deal can be priced very differently from one lender to the next. For current pricing across every loan type, see our commercial property interest rates page.

Beyond the deposit, budget for the usual transaction costs:

• Stamp duty, calculated on the price and varying by state. Estimate yours with our stamp duty calculator.
• Legal and conveyancing fees for the contract and settlement.
• Valuation and lender fees, which we confirm up front, and which for a tenanted property also assess the lease and market rent.
• GST, which can apply unless the sale qualifies as a going concern, common where the property transfers with a tenant in place.

Together these usually add a few percent to the price, so I build them into your cash position from the start, rather than leaving you short in the weeks before settlement.

Often, yes, and it is more common on investment loans than on owner-occupier ones. Interest-only periods keep your repayments lower while you hold the asset, usually at a small premium of around 0.15% - 0.30% over the principal-and-interest rate, and the loan reverts to principal and interest once the interest-only period ends.

Whether it suits your situation is a question for you and your accountant, but the option is widely available, and we will set the structure up to match how you plan to hold the property.

A few are worth knowing, though the detail sits with your accountant. Rental income is generally assessable, and the interest on your investment loan, along with many of the holding costs, is usually deductible against it. On the way in, GST may apply unless the sale is a going concern, and on the way out, capital gains tax applies on disposal, sometimes with concessions depending on how you hold the property.

How all of this lands depends heavily on the ownership structure, whether you buy personally, through a company, a trust or a self-managed super fund, so I always suggest confirming the specifics with your accountant and checking the current rules on the ATO website. Our part is making sure the finance structure supports whatever setup you and your accountant settle on. This is not tax or financial advice; speak to your financial adviser before making any decisions.

Yes, more than many investors expect. Lenders read the market the property sits in, because location drives both the valuation and how confident they are in the rent holding up. A well-located metro asset reaches a higher LVR and sharper pricing than the same building in a thin regional market, where the lender may want more deposit.

We arrange commercial property investment finance right across the country. You can see how each market is moving on our commercial property market overview, with deeper reads for Sydney, Melbourne and Brisbane, and for finance in a specific city our commercial property finance locations pages set out how we work in each.

Most settle within 4 to 8 weeks of a formal application, and an indicative approval can come through in a few days when your documents are ready at submission. The lease is the part that can add time, because lenders want to see the lease agreement, confirm the rent and check the tenant, so having those ready up front keeps things moving. As with any commercial deal, an out-of-date financial or a valuation that lands short is what usually causes delay.

Less than most people expect, and I hand you a tailored checklist after the first conversation. Broadly there are two sets.

About you and your income:

• Recent personal or business financials and tax returns
• Details of any other property and the equity in it
• Recent bank statements

About the property and the lease:

• The contract of sale, or property details if you are still looking
• The lease agreement, or the proposed lease and likely rent if it is vacant
• An independent valuation, which we coordinate

The lease does a lot of the heavy lifting on an investment deal, so the more we can show about the tenant and the term, the better the terms we can reach.

The quickest way is the eligibility check above. It takes about a minute and reads the factors lenders weigh most, your deposit, the lease and tenant, the rent against the repayments, the property and your credit position, then returns an instant indication.

For a proper, deal-specific answer, call me on 1300 262 098 or get in touch through our contact page. We have arranged more than $550 million in finance for over 3,300 Australian businesses and investors across the commercial property loans we handle, and I will tell you honestly whether your deal stacks up before you spend time on it.