Join Australia's most dynamic and respected property investment community

Commercial Borrowing - Rent Discount %

Discussion in 'Property Finance' started by DanW, 15th Sep, 2015.

  1. DanW

    DanW Well-Known Member

    Joined:
    26th Jun, 2015
    Posts:
    400
    Location:
    Sydney
    Hi All,

    Using Resi, the lender typically only takes 70% or 80% of the rental income towards servicability, but the $rent amounts are small as the yield is small. So I'm wondering if it's the right time to start moving towards commercial and focus on income/yield instead of leverage and growth.

    How do commercial lenders calculate serviceability (assuming a good 5 year lease)?

    If we don't service with Resi due to APRA changes, but we can get a commercial rent of 10% yield - will a commercial lender take the deal?
    e.g. at 70% LVR?
     
    Elives likes this.
  2. Mick C

    Mick C Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    206
    Location:
    Sydney
    ^ Yes they can.

    at 65-70% LVR no need for any docs/ payslips etc.. so can do it as a lease doc loan....as long as the rent on this purchase service the loan it's all good.

    Rate is ok for a comm lease doc loan as well ...sub 4.60% for 3 years fixed or 5.30-.5.60% variable.
     
  3. Mick C

    Mick C Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    206
    Location:
    Sydney
    Rent is discounted to 80% for comm lenders ( some dont discount at all and take 100% true value minus outgoings etc.. ) ...and some resi lenders it range from 60%- 80%
     
  4. DanW

    DanW Well-Known Member

    Joined:
    26th Jun, 2015
    Posts:
    400
    Location:
    Sydney
    Great, thanks Mick.

    So APRA not going to stop everyone if there's a will.. just need to convert to a cashflow mindset
     
  5. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,167
    Location:
    Adelaide, SA
    A key to any strong plan (be it investment, business, sports, relationships) is to be able to be flexible and able to evolve with the environment around you.

    A cash flow mindset is a start, deep pockets for deposits is essential. :)