Buying commercial property to relocate your business means securing finance that reflects how lenders assess income-producing assets rather than residential homes.
The approach differs from a standard home loan in almost every aspect, from the deposit you need to the way lenders evaluate your application. Commercial property finance is structured around the property's income potential, your business cashflow, and the type of tenancy or use planned for the premises. Whether you're moving from leased premises to owner-occupied space or consolidating operations into a larger facility, the lending structure will depend on whether the property generates rental income, how your business will occupy the space, and what security you can provide.
Commercial Deposit and LVR Requirements
Most lenders require a deposit of at least 30% for commercial property purchases, which translates to a maximum loan to value ratio of 70%. Some lenders may extend to 80% LVR in specific circumstances, such as owner-occupied premises with strong business financials or strata commercial properties in well-located precincts. The deposit can come from genuine savings, equity in existing residential or commercial property, or a combination of both. If you're using equity from your home in Dianella or another residential asset, lenders will assess the combined security position across both properties and apply a blended LVR.
Consider a business owner purchasing a warehouse in Malaga to relocate operations from a leased site in Dianella. The property is valued at $800,000. With a 30% deposit of $240,000, the loan amount would be $560,000. If the buyer doesn't have cash savings but owns a home in Noranda valued at $650,000 with a $200,000 mortgage, they could potentially access up to $455,000 in usable equity at 80% LVR. This would cover the deposit and leave funds available for stamp duty and settlement costs, which for commercial property in Western Australia can add another 4% to 5% of the purchase price.
How Lenders Assess Commercial Property Purchases
Lenders evaluate commercial property loans based on the property's ability to generate income and your business's capacity to service the debt. If the property will be owner-occupied, lenders focus on your business cashflow, profit and loss statements, and tax returns from the past two years. If the property will be leased to a tenant, lenders assess the rental income against the loan repayments and apply a serviceability buffer, typically requiring rental income to cover at least 120% to 130% of the annual loan repayment.
For owner-occupied premises, lenders also consider the business use and zoning. A medical practice relocating to a strata office in Morley will have different risk considerations than a logistics company purchasing an industrial warehouse. Lenders prefer properties with clear commercial zoning, established tenant demand in the area, and minimal vacancy risk. If you're purchasing a property that requires development approval or a change of use, expect more conservative lending terms or a requirement for pre-approval from the local council before finance is finalised.
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Commercial Interest Rates and Loan Terms
Commercial interest rates are generally higher than residential rates, typically sitting 0.5% to 1.5% above standard variable home loan rates. The exact rate depends on the LVR, loan amount, property type, and whether the loan is owner-occupied or investment. Fixed interest rate options are available, usually for terms of one to five years, though not all lenders offer fixed rates on commercial loans. Variable interest rate loans provide more flexibility with redraw facilities and the option to make additional repayments without penalty.
Loan terms for commercial property finance typically range from five to 30 years, though many lenders prefer shorter terms of 15 to 20 years for owner-occupied premises. Interest-only periods of up to five years are common, particularly for investment properties where rental income is used to service the loan. The loan structure you choose should align with your business plans, particularly if you're relocating with the intention to expand or eventually sell the property.
Commercial Property Valuation and Settlement
Commercial property valuations are more detailed than residential valuations and focus on the income-generating potential of the asset. Lenders engage registered valuers who assess comparable sales, rental yields, tenant quality, lease terms, and the property's condition. Valuation costs typically range from $1,500 to $5,000 depending on the property type and location. If the valuation comes in lower than the purchase price, you may need to increase your deposit or renegotiate the sale price.
Settlement timelines for commercial property are often longer than residential purchases, typically 60 to 90 days, which allows time for due diligence, finance approval, and any necessary building or strata inspections. Commercial property transactions also involve GST considerations. If the vendor is registered for GST and the property is sold as a going concern with an existing lease, the sale may be GST-free. If not, GST may apply to the purchase price, which affects the finance amount and your deposit calculation. Your solicitor and accountant should review the contract before you submit a commercial property loan application.
Strata Commercial and Owner-Occupied Premises in Dianella
Strata commercial properties, such as office suites or retail units in a larger complex, are common in Dianella and surrounding areas like Morley and Malaga. These properties are often more accessible for small businesses due to lower purchase prices and shared building costs. Lenders view strata commercial properties favourably if the complex is well-maintained, the strata fees are reasonable, and the location supports tenant demand. However, lenders may require a lower LVR or apply stricter serviceability tests if the complex has high vacancy rates or significant planned maintenance.
If you're relocating to an owner-occupied commercial property, the loan structure will reflect the fact that the business generates the income to service the debt rather than a tenant. In our experience, businesses purchasing their own premises often benefit from lower long-term costs compared to leasing, particularly in areas like Dianella where commercial lease rates have remained steady. However, the upfront capital required is significantly higher, and your business must demonstrate consistent cashflow to meet lender serviceability requirements.
Accessing Equity to Fund Your Commercial Property Purchase
Many business owners use equity from residential property to fund the deposit and costs associated with purchasing commercial premises. If you own a home in Dianella or a nearby suburb, you may be able to access equity without selling the property. Lenders will assess the combined loan position across both the residential and commercial security and apply an overall LVR based on each property type. Residential equity can typically be accessed up to 80% LVR, while the commercial property is financed at 70% LVR.
For example, a business owner with a home valued at $700,000 and an existing mortgage of $300,000 could access up to $260,000 in usable equity at 80% LVR. This could cover the deposit on a $900,000 commercial property, plus settlement costs. The lender would structure the loan as a split facility, with one portion secured against the home and another secured against the commercial property. This approach is common when relocating a business, as it allows you to retain your residential property while gaining the long-term benefits of owning business premises. If you're considering this structure, it's worth reviewing your existing home loan to confirm how much equity is available.
Commercial Property Investment and Portfolio Growth
Some businesses purchase commercial property not only for relocation but as part of a broader investment strategy. Owning the premises your business occupies provides rental income if you later choose to relocate or lease part of the property to another tenant. Commercial property investment also allows you to build a portfolio of income-producing assets, which can support future borrowing capacity or provide additional security for business expansion.
Commercial rental income is assessed differently than residential rental income. Lenders typically apply a shading factor of 70% to 80%, meaning they only count 70 to 80 cents of every dollar of rental income when calculating serviceability. They also consider the lease term, tenant quality, and vacancy risk. A property with a long-term lease to a national tenant will be viewed more favourably than a property with short-term or month-to-month tenancies. If you're purchasing a commercial property with an existing tenant, the lease agreement should be reviewed by your solicitor before settlement to confirm the terms and any ongoing obligations.
Call one of our team or book an appointment at a time that works for you to discuss how commercial property finance applies to your relocation plans and what deposit, loan structure, and documentation you'll need to move forward.
Frequently Asked Questions
What deposit do I need to buy commercial property for my business?
Most lenders require a deposit of at least 30% for commercial property purchases, which translates to a maximum loan to value ratio of 70%. Some lenders may extend to 80% LVR for owner-occupied premises with strong business financials or well-located strata commercial properties.
Can I use equity from my home to buy commercial property?
Yes, you can use equity from residential property to fund the deposit and costs for purchasing commercial premises. Lenders will assess the combined loan position across both properties and apply an overall LVR based on each property type, typically 80% for residential and 70% for commercial.
How do lenders assess commercial property loans for owner-occupied premises?
Lenders focus on your business cashflow, profit and loss statements, and tax returns from the past two years. They also consider the business use, zoning, and the property's ability to support your business operations rather than relying on rental income.
Are commercial interest rates higher than residential rates?
Yes, commercial interest rates are generally 0.5% to 1.5% above standard variable home loan rates. The exact rate depends on the LVR, loan amount, property type, and whether the loan is owner-occupied or investment.
What additional costs should I budget for when buying commercial property?
You should budget for stamp duty, which can add 4% to 5% of the purchase price in Western Australia, plus valuation costs ranging from $1,500 to $5,000, legal fees, building inspections, and potential GST if applicable. Settlement costs are typically higher than residential property transactions.
