The smartest way to finance commercial vacant land

Purchasing commercial vacant land represents a significant opportunity for business owners and investors looking to expand their operations or build a commercial property portfolio. Whether you're planning to construct your own business premises or hold the land as a commercial investment, understanding your commercial property finance options is crucial for making informed decisions.

Understanding Commercial Vacant Land Finance

Commercial property loans for vacant land differ from standard commercial property purchase loans. Lenders view vacant land as higher risk since there's no existing income stream or built structure to secure against. This means you'll need to prepare for different lending criteria and commercial interest rates compared to established commercial properties.

Key considerations for vacant land financing include:

• Higher commercial deposit requirements (typically 30-50%)
• Different commercial LVR calculations
• Shorter commercial loan terms initially
• More detailed commercial application requirements
• Specific commercial zoning verification

Commercial Deposit and Equity Requirements

Securing a commercial property loan for vacant land typically requires substantial commercial equity. Most lenders expect a commercial deposit of at least 30% of the land value, though some may require up to 50%. This higher deposit requirement reflects the increased risk associated with undeveloped land.

If you own existing commercial property or business assets, you may be able to leverage this commercial equity to meet deposit requirements. Some clients also use residential property equity, though this depends on your overall loan structure and lender requirements.

Loan Structure Options for Vacant Land

Commercial property finance for vacant land often involves a staged approach:

1. Initial land purchase loan - shorter term financing to secure the property
2. Development or construction phase - if you plan to build
3. Permanent financing - long-term commercial mortgage once development is complete

This staged approach allows you to access commercial property loan options that align with your development timeline and business cashflow requirements.

Commercial Property Valuation and Due Diligence

Before approving your commercial loan amount, lenders require a comprehensive commercial property valuation. For vacant land, valuers consider factors including:

• Location and accessibility
• Commercial zoning restrictions
• Development potential
• Market demand in the area
• Infrastructure availability
• Any commercial DA (Development Application) approvals

Conducting thorough due diligence helps ensure your commercial property investment aligns with your business objectives and the lender's requirements.

Interest Rate and Repayment Options

Commercial interest rates for vacant land typically sit higher than rates for established commercial properties. You'll usually have options for:

• Variable interest rate - rates that fluctuate with market conditions
• Fixed interest rate - locked rates for a specified period
• Interest-only repayments - during initial holding or development phases
• Principal and interest - standard repayment structure

Some lenders offer flexible repayment options that accommodate the unique nature of vacant land ownership, particularly if you're planning staged development.

Commercial Stamp Duty and Additional Costs

When budgeting for your commercial property purchase, factor in commercial stamp duty and other transaction costs. In Western Australia, commercial stamp duty rates differ from residential property, and the calculation can be complex depending on the intended use and value of the land.

Additional costs may include:

• Legal fees for commercial settlement
• Commercial property valuation fees
• Building and pest inspections (where applicable)
• Commercial GST implications
• Ongoing holding costs during development

Building Your Commercial Property Portfolio

Purchasing vacant commercial land can be an effective way to build a commercial portfolio, particularly in growing areas like Caversham. The land provides a foundation for future development while potentially appreciating in value over time.

Consider how this purchase fits within your broader commercial investment strategy and whether you might benefit from exploring other options like commercial property loans for established properties or business loans for operational expansion.

Working with Experienced Commercial Finance Specialists

Securing commercial property finance for vacant land requires expertise in both commercial lending and development finance. Professional mortgage brokers can help you access commercial property loan options from banks and lenders across Australia, comparing terms and finding solutions that match your specific requirements.

At Solve It Finance, we understand the unique challenges of commercial vacant land purchases. Our team works with Caversham-based clients to structure appropriate financing solutions, whether you're looking to buy business premises sites, expand business property holdings, or develop your own business premises.

Every commercial property transaction is unique, and vacant land purchases require particular attention to zoning, development potential, and financing structure. Professional guidance helps ensure you secure appropriate commercial property finance terms while avoiding potential complications.

Ready to explore your options for purchasing commercial vacant land? Call one of our team or book an appointment at a time that works for you to discuss your commercial property finance needs.