A Comprehensible Commercial Real Estate Loan Guide in 2022

 Are you contemplating purchasing any commercial property? If yes, then this blog is exclusively meant for you so that you can learn a few things regarding commercial property loans in Australia. You need to go through our tips and knowledge about the ways commercial property loans operate and what your expectations could be as far as the interest rates in commercial property are concerned. 

 

Remember the following points- 

 

• As an amazing investment tool, commercial property can be quite beneficial. 
• A variety of options are available for commercial property loans. 
• Compared to a regular home loan, commercial property loan rates can be higher.  
• Compared to a regular mortgage, commercial property loans mostly necessitate a larger deposit. 

 

Commercial Property Loans 

 

Mortgage brokers in Australia will show you that lenders provide a wide range of commercial property loans. The type of loan most relevant to your needs will be based on whether you are purchasing any commercial property as a business owner or as an investor. 

Commercial property loan rates differ amongst lenders although they are frequently higher compared to a regular home loan. The reason is that commercial property can be viewed as a riskier investment. 

 

Proposing residential property such as your home or rental property as security can facilitate the reduction of commercial property interest rates. 

 

Be Ready to Pay a Higher Deposit 

 

Commercial property loans normally require a deposit of a minimum of 30% of the purchase price. 

 

Various Categories of Commercial Property Loans 

 

Maximum commercial real estate loans operate in almost the same way as a home loan. 

You need to select between a fixed rate, variable rate, split rate, principal and interest, or an interest-only loan. A lot of commercial property loans are also accompanied by effective features such as fee-free extra repayments or an offset facility. 

 

Additionally, you may opt for a line of credit commercial property loan. This allows you to fund up to a predetermined limit and you just have to pay interest on the funds drawn down. Your mortgage broker can assist you in choosing a commercial property loan appropriate for your needs and budget, providing you with a clear concept of how much you can afford to borrow and the usual loan repayments. 

 

Commercial vs. Residential Property 

 

Long Term Leases 

 

Commercial property leases ideally run for longer periods compared to residential properties for many years instead of just 6 months to a year. This provides you with a better assurance of rental income. Moreover, rents are subject to annual reviews. But the vacancy periods can be longer. 

 

The Effect of GST 

 

Goods and services tax (GST) is applicable once you purchase a commercial property. So, let there be an additional 10% on the property’s purchase cost. Being an investor, you may claim the GST back as an ‘input tax credit’ against GST levied on the property’s rent. 

 

The Lessee Pays Maintenance Costs 

 

Dissimilar to the concept of a residential property, the maintenance costs, apart from rates and repairs on any commercial property are paid by the lessee and not the landlord. This signifies that more of the rent you receive goes towards your revenue. But do confirm that your commercial lease clarifies who is the person responsible for the property’s present expenses. 

 

Certain Commercial Properties Serve a Limited Purpose 

 

It can be challenging to protect a lessee on a property that’s meant for a certain purpose. If you select a property with a multi-use appeal, then it can help you reach out to a wider option of tenants. 

 

Location is Very Crucial 

 

Regarding any real estate investment, location plays a vital role in the success of a commercial property. You need to opt for an area providing outstanding transport links, a pool of workers in close proximity, and adjoining businesses that could provide support for lessees.