A commercial property is structured a little differently to standard residential property, and the terms are calculated based on the risk of owning the property. We’ll work closely with you to navigate this minefield to ensure we pinpoint the most suitable finance for your needs. We’ll consider the rates, terms, conditions, and contract to ensure you get the best deal. When it comes to commercial property, you really need to talk to the property structural experts.
You might consider purchasing in one of the following ways:
- Buying commercial property as an investor, and
- Buying commercial property for your business premises.
We’ll look at both.
Buying Commercial Property as an Investor
Commercial property is similar in design to residential property, but fundamentally different when it comes to structure and terms. A commercial property can deliver both ongoing rent paid by the tenant – or in the case of commercial property, the “lessee” – as well as long term capital growth. But in many ways the similarities stop there.
Longer Leases, Higher Returns… and Higher Risk
First, when you buy a commercial property, GST (worth 10% of the purchase price) is payable on your investment. You need to factor this into your buying budget.
On the plus side, commercial leases tend to be long, usually a minimum of five years, and unlike residential property, the lessee pays for many of the costs associated with owning the building such as repairs and maintenance. This can make commercial property a lucrative and low cost investment.
On the downside, commercial property is also regarded as a higher risk investment than residential property. While the rent returns can be healthy, commercial properties can also experience longer vacancy periods. Commercial properties can be harder to sell too because the pool of buyers is typically smaller than for residential property, and the more specialised your property, the smaller the market may be.
External Factors
Unlike residential property, where people always need a home to live in, the fortunes of commercial property can very much hinge on the buoyancy of the local economy. You may safeguard against this by investing in a commercial property in an area with a diverse economy, buying a building that may appeal to a broad range of businesses, and reviewing your cashflow to see how well you would handle periods of vacancy.
Professional Support is Essential
We will discuss finance options with you as well as explaining loan strategies to own commercial property including through a self-managed super fund.
Buying Commercial Property for your Business Premises
There’s a lot to be said for owning your business premises, and an investment in commercial property can let you do just that. If you operate your own business, chances are you know just how important it is for your customers to associate your venture with a particular fixed and longer-term location. Leasing rather than owning your premises can be more affordable in the short term but you simply don’t have the same security of tenure.
There’s always an argument to purchase your own commercial premises, and there are a number of ways to achieve this goal. Let’s look at just two.
Buying in your Business Name
The property becomes an asset of the business and the cash flow from your business will be used to repay the loan. As you build equity in the property, you can use it to secure loans for other business purposes.
Buying in your Own Name or Through a Self-Managed Super Fund
You will enjoy the capital appreciation for the property and your business will lease the property from you. You can build up your personal wealth while also providing your business long term access to the premises.
