Commercial Borrowing - Rent Discount %

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?

 

^ 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.

 

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%

 

Great, thanks Mick.

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

 

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.