Should You Buy or Rent Commercial Property In Australia?

Every month, you write that rent cheque and wonder if buying makes more sense. You’re not alone, and deciding whether to buy or rent commercial property isn’t always obvious.

This guide gives you the complete picture on whether you should buy or rent commercial property for your business. No guesswork, no vague advice. Just clear insights based on 15+ years helping Australian businesses make this exact decision. We’ll cover when buying makes overwhelming sense, when renting is smarter, the real costs of each option, and how to structure the decision properly.

By the end, you’ll know which path is right for your business and exactly what to do next.

How Buying vs Renting Commercial Property Actually Works

The question of whether to buy or rent commercial property isn’t just about monthly costs. I’ve walked hundreds of business owners through this decision, and the ones who get it right are looking at the complete picture.

When you rent commercial property, you know exactly what you’re paying each month. It’s predictable, it’s someone else’s problem when things break, and you can walk away if your business needs change. That simplicity has real value, especially for growing businesses or those testing new markets.

Buying commercial property flips the equation entirely. Yes, you’re building equity instead of making your landlord wealthier. But you’re also taking on stamp duty (typically 4-5% in most states), ongoing maintenance, interest costs, and the risk that your business circumstances might change.

Here’s what most people miss: the tax benefits of owning can be substantial. You’re deducting interest, claiming depreciation, and potentially reducing your tax bill by tens of thousands annually. That’s money that stays in your business rather than going to the ATO. Your accountant should model this for your specific situation, but it often tips marginal decisions toward buying.

The other piece that catches people off guard is how lenders assess owner-occupier commercial property loans. Your business profit matters far more than your personal income. A profitable business with $150,000 EBITDA might borrow $400,000-$500,000, even if the owners don’t pay themselves huge salaries. That opens doors you might not realise are available.

Break-even timelines vary wildly when deciding whether you should buy or rent commercial property. Sometimes you’re ahead within 18 months. Other times it takes seven years before the equity gains outweigh the upfront costs. Your specific numbers depend on your rent level, purchase price, deposit size, and how long you plan to stay put. This is why running the numbers is crucial before making assumptions.

The Real Costs of Buying (Beyond the Purchase Price)

Let’s talk about what actually happens when you buy commercial property, because the purchase price is just the beginning when making your rent or buy business premises decision.

Stamp duty hits hard. In Queensland, you’re looking at roughly 4.5% on a commercial property purchase. Buy an $800,000 warehouse and you’re paying around $36,000 in stamp duty alone. New South Wales is similar. Victoria’s a touch higher. This isn’t negotiable, and you need it in cash.

Legal and conveyancing costs run $3,000-$8,000 depending on complexity. Add building inspections, pest checks, and due diligence costs. You’re easily spending another $2,000-$5,000 before you own anything. These costs are real, immediate, and completely separate from your deposit.

Lender fees vary, but expect valuation costs ($800-$2,000), application fees (sometimes $600+), and potentially a mortgage broker fee if you’re not using someone like us who gets paid by the lender. All of this needs to be in your budget before you make an offer. Learn about the full purchase process →

Once you own the property, ongoing costs land in your lap. Commercial property rates, building insurance, maintenance reserves. Budget 1-2% of the property value annually. That $800,000 building? You’re probably spending $12,000-$15,000 per year on these items. Yes, they’re tax-deductible. No, they don’t disappear just because you own the asset.

Interest costs are your biggest ongoing expense. At 6.5% on a $600,000 loan, you’re paying roughly $39,000 in interest during year one. The tax deduction helps, but you’re still writing significant cheques. Compare current commercial property interest rates →

Here’s the important bit: these costs don’t make buying wrong when deciding whether to buy or rent commercial property. They just need to be in your equation. Plenty of our clients spend more on ownership costs than they were paying in rent and still come out ahead because of equity growth and tax benefits. But you need eyes wide open going in.

The Hidden Benefits That Make Buying Worth It

Now let’s flip to the other side, because this is where the decision to buy or rent business premises starts to look really attractive for ownership.

Forced savings through principal reduction. Every month, part of your payment goes towards actually owning more of the building. It’s not flashy, but over five years you might pay down $100,000-$150,000 of principal. That’s equity you’ve built, and it’s yours. When you rent, 100% of that money is gone forever.

Property appreciation is the wild card that often tips the scales. Commercial property in decent locations tends to grow 3-4% annually over long periods. Some years nothing happens. Other years you get 8-10% gains. On an $800,000 property growing at 3% annually, you’ve gained $120,000 in value after five years. Combined with principal reduction, you might have $250,000+ in equity from a property you’re using every day.

Tax benefits deserve their own paragraph because they’re substantial when considering whether you should buy or rent commercial property. Your interest is fully tax-deductible against business income. Depreciation on the building and fixtures creates paper losses that reduce taxable income. For a business in a higher tax bracket, these deductions can be worth $15,000-$25,000 annually in actual tax saved. That’s money that would have gone to the ATO instead staying in your business.

Rent protection is underrated in the buying vs renting commercial property equation. When you own, your landlord can’t increase your costs by 10% next year because the market’s hot. You’re locked into your interest rate (if fixed) or dealing with relatively predictable market movements. The certainty has value, especially when planning long-term business budgets.

Here’s something most people don’t consider when deciding whether to buy or rent commercial property: your property becomes a business asset with real value. When you sell your business, that property might be part of the package. Or you keep it and become the landlord to whoever buys your business. Either way, you’ve created an asset that generates options you didn’t have as a tenant.

Retirement planning gets easier too. Own your premises, and you can sell the business but keep the property, creating rental income. Or sell everything and use the capital to fund retirement. You can’t do any of that with years of rent receipts. Explore investment property finance strategies →

When Buying Makes Complete Sense

Some situations make the decision to buy or rent commercial property obvious, where buying is clearly the right choice. Let me walk through when to buy commercial property based on hundreds of successful deals.

Your business has been established for at least two years with stable or growing revenue. Lenders want to see track record, and you want to be confident you’re not about to pivot into a different business model. If you’ve been in the same industry for five years, profitable for three, and plan to keep going, you’re in the sweet spot for the rent or buy business premises decision.

Location stability matters enormously. If you know you’ll be in this area for the next 5-10 years, ownership starts looking very attractive. The longer your timeline, the more time you have to absorb upfront costs and benefit from appreciation. Short-term plans (under three years) rarely favour buying because you don’t have time to build meaningful equity through the business premises commercial property purchase process.

High rent relative to potential mortgage payments is a huge signal. When your monthly rent is close to what a mortgage payment would be, you’re basically choosing between paying someone else’s loan or paying your own. Numbers show you exactly where this sits for your situation.

Strong business cash flow makes everything easier. If your business generates healthy profit and you have access to the deposit funds (either saved or through property equity), buying becomes a realistic option rather than a stretch goal. We’ve helped businesses with $150,000 EBITDA buy $800,000 properties because the numbers worked.

Industry stability plays a role too when deciding whether to buy or rent commercial property. If you’re in a business that’s not going anywhere (medical, legal, manufacturing, warehousing), owning your premises makes more sense than if you’re in a rapidly changing industry where flexibility might be crucial. See our medical premises finance options here →

The business structure can influence when to buy commercial property. Companies and trusts often have easier paths to property ownership than sole traders because of how lenders assess serviceability. This factors into your borrowing capacity calculations automatically, but it’s worth understanding how your structure affects the decision.

When Renting Remains the Smarter Choice

Buying isn’t always the right answer when deciding whether to buy or rent commercial property, and knowing when to keep renting is just as important as knowing when to buy.

New businesses under two years old face serious hurdles with lenders. Even if you have great cash flow, most lenders want to see two years of financials before they’ll consider a commercial property loan. If you’re growing fast and profitable, be patient. Build that track record, then buy when lenders actually want to work with you.

Businesses in transition shouldn’t be buying. If you’re considering pivoting your business model, expanding rapidly, or testing new locations, renting gives you flexibility that ownership can’t match. Making a $50,000 mistake on a lease is survivable. Making an $800,000 mistake on a property purchase can end your business.

Location uncertainty is a massive red flag in deciding whether you should buy or rent commercial property. If there’s any chance you’ll need to move in the next 2-3 years, renting is almost certainly smarter. The transaction costs of buying and selling commercial property are substantial enough that short holding periods rarely work out financially.

Capital allocation sometimes favours renting when weighing up whether to buy or rent business premises. If that deposit money could generate higher returns invested in your business, equipment, or expansion, it might make sense to keep renting and deploy capital where it works harder. A $200,000 deposit might buy you a building, or it might double your business revenue if invested correctly. Consider equipment finance options →

Industries with high risk of disruption should think carefully when deciding whether to buy or rent commercial property. If your business model might be obsolete in five years (think about what happened to video rental stores or travel agencies), tying up capital in property might not be wise. Flexibility can be worth more than equity.

Some markets are simply overheated. When commercial property prices are at historical highs and rental yields are low, waiting for the market to correct might be smarter than buying at the peak.

Lifestyle factors matter too when considering whether you should buy or rent commercial property. Some business owners genuinely prefer being tenants. They like having someone else handle maintenance, they value the flexibility, and they’d rather focus on running their business than managing property. That’s a legitimate choice.

Using Your Home Equity to Buy Commercial Property

Many business owners don’t have $200,000 sitting in the bank for a commercial property deposit, but they do have equity in their home. This is one of the most common ways people answer “should I buy or rent commercial property” in favour of buying.

Here’s how it works: The lender takes security over both your residential property and the commercial property you’re buying. This means you can potentially purchase commercial property with little or no cash deposit because your home equity covers the deposit requirement.

The advantages are obvious when deciding whether to buy or rent business premises. You can buy without depleting business cash reserves. You’re using equity that’s sitting idle in your home to acquire an income-producing business asset. You avoid the years it might take to save a commercial deposit while your rent keeps increasing.

The risks are real though. If your business struggles and you can’t meet the commercial loan repayments, your home is at risk because it’s part of the security. We always advise discussing this strategy with your accountant and considering worst-case scenarios before proceeding.

Many of our clients use home equity for the deposit, then structure the loans so only the commercial property secures the commercial loan once they’ve built 20-30% equity. This gives you the best of both worlds: access to your home equity to get started, but separation of assets for protection later. Discuss your specific situation →

How We Help You Make This Decision and Take Action

Working out whether you should buy or rent commercial property is step one. Making it happen is where things get interesting.

Our role starts with understanding what you actually qualify for. Numbers give you estimates, but every lender has different serviceability rules. Some are generous with established businesses. Others are stricter but offer better rates. We know which lenders suit your specific situation because we’ve placed hundreds of commercial property loans.

Pre-approval changes everything when you’re property hunting. Walking into negotiations knowing you’re approved for $600,000 means you can move fast when the right property appears. Commercial properties often sell quickly, and sellers take approved buyers seriously.

Structure matters enormously when deciding whether to buy or rent commercial property. Should the property be in your personal name, business name, trust, or SMSF? Each option has different tax implications, asset protection considerations, and lending requirements. We work with your accountant to get this right from the start, rather than discovering structure problems months into the process. Explore SMSF commercial property finance →

Lender selection isn’t about finding the lowest rate. It’s about finding the lender who suits your business structure, property type, and financial situation. A bank that’s perfect for a medical practice buying a consulting suite might be terrible for a manufacturing business buying a warehouse. We match you with lenders who actually want your type of deal.

The property itself influences lending outcomes when deciding whether to buy or rent commercial property. Some properties are easier to finance than others. Specialty properties, properties in regional areas, or properties with unusual zoning can be tricky. We help you understand what you’re getting into before you make an offer, so you’re not surprised when the bank says no.

Timing the transition from construction (if building) or settlement is crucial. Your current lease might need extending, or you might need bridging finance. We’ve done this enough times to anticipate the tricky bits and plan around them. Learn about construction finance →

After settlement, we help with the end loan refinance if you’ve used construction finance, review rates annually, and help you access equity as your property appreciates. Buying the property isn’t the end of our relationship, it’s the beginning.

Common Questions About Whether to Buy or Rent Commercial Property

How much deposit do I need to buy commercial property?

Most lenders require 20-30% deposit for commercial property purchases. If you’re owner-occupying your business premises, you might access up to 80% LVR (20% deposit). For investment properties, expect 70% LVR (30% deposit).

The good news is you don’t necessarily need this in cash when deciding whether to buy or rent business premises. Many of our clients use equity from their home or other properties to cover part or all of the deposit. Some use a combination of savings, business cash reserves, and property equity. Calculate your borrowing capacity →

Can I borrow based on business profit alone?

Yes, commercial property loans are assessed primarily on business financial performance, not personal income. This is completely different from residential lending and affects how you should think about whether to buy or rent commercial property.

Lenders typically use a serviceability multiplier of 2.5-3.5 times your annual net profit. For example, if your business makes $150,000 net profit, you might borrow $375,000-$525,000 depending on the lender and your specific circumstances. Your business needs at least two years of financials for most lenders to assess. Learn more about commercial property loans →

What interest rate should I expect?

Commercial property interest rates in Australia typically range from 6.0% to 7.5% as of 2025. This is generally 0.5-1.5% higher than residential home loan rates, which is important to factor into your decision about whether to buy or rent commercial property.

Your actual rate depends on several factors. Owner-occupied properties often get better rates than investment properties. Lower LVRs (bigger deposits) secure better rates. Stronger business financials mean better rates. Compare current commercial property interest rates →

When is the break-even point for buying vs renting?

Break-even varies wildly based on your rent level, purchase price, deposit size, and property appreciation. Generally, if you’re breaking even within 3-5 years and planning to stay longer than that, buying looks attractive when you’re weighing up whether to buy or rent commercial property.

The longer your time horizon, the more buying favours you because of equity accumulation and property appreciation. Calculate if buying makes more sense than renting →

What if I’m planning to build?

Construction finance for commercial property works differently from buying an existing building. The lender approves the total project cost, releasing funds progressively as construction milestones are completed. You typically pay interest-only on drawn funds during construction, then convert to principal and interest once complete.

Most lenders want detailed costings, approved plans, and a licensed builder under contract. Your deposit requirement might be higher (sometimes 30% rather than 20%). Learn about commercial construction loans →

Can I use my SMSF to buy commercial property?

Yes, buying commercial property through your SMSF is one of the most tax-effective structures available, especially if you’re leasing the property back to your own business. The rent payments become tax-deductible to your business while building your retirement wealth.

SMSF property purchases have specific rules around related party transactions, borrowing restrictions, and property use. Learn more about SMSF commercial property rules →

Related Resources