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Commercial Property Education - SS Sticky

Discussion in 'Commercial Property' started by Lil Skater, 30th Jun, 2015.

  1. Lil Skater

    Lil Skater Well-Known Member Business Member

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    Since SS will be closing it's doors shortly, I've gathered a couple of the old sticky threads on SS that I thought would be useful for those who ever wish to refer back or some of our new members. Here goes!

    Original post by SS member JIT

    Hi,

    How does someone go about learning how to invest in commercial property in Australia?

    There is clearly a plethora of options to learn about residential property investment, but very, very few avenues to learn about commercial property investment.

    Furthermore, there are plenty of resources for commercial property investment in the US and UK, but comparatively very few in Australia.

    Does anyone have any ideas or suggestions?

    To start off with...

    Books

    'How to Invest in Commercial Property' by Martin Roth and Chris Lang
    'Australia's Top Property Trusts' by John Welch

    Websites

    www.gal.com.au (Gardner and Lang)
    www.propertyoz.com.au (Property Council of Australia)
    www.propertyreview.com.au (commercial property news)
    www.commercialpriceguide.com.au (commercial property auction results)
    www.realcommercial.com.au (property search engine)
    www.domain.com.au (property search engine)
    www.realestateview.com.au (property search engine)
    www.propertylook.com.au (property search engine)
    www.propertyweb.com.au (commercial property search engine and news)

    Newspapers

    The Australian Financial Review
    The Australian, Thursday Edition

    Courses

    www.investcommercialproperty.com.au (Michael McCombie DVD course)

    Investment Research Companies

    www.pir.com.au
    www.aer.com.au
    www.lonsec.com.au
    www.miaresearch.com

    That's not much of a list, but it's a start. I hope that this commercial property forum on Somersoft(thanks Moderators!) can in the future be as good a resource for commercial property investment, as it is now for residential property investment.

    I will add to the list as I find more resources.

    Any other ideas welcome.

    GSJ

    Full thread available here.
     
    bob shovel likes this.
  2. Scott No Mates

    Scott No Mates Well-Known Member

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    Some of those linkys are outdated Lil.

    You may want to add APINSW.org.au, bis.com.au,
     
  3. Lil Skater

    Lil Skater Well-Known Member Business Member

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    Thank Scott, will edit later on.

    So many good threads on SS, but many of them were too outdated :(
     
  4. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker

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    Not much about commercial IPs so great to create a thread.

    Here is a very high level look at the commercial lending side of things:

    1. Most lenders will offer max loan terms of 15 years instead of the traditional 30 years in Residential Lending
    2. Very hard to finance properties that do not have leases or have expired leases
    3. Interest rate is not everything - check out the conditions of the loan as well as fees
    4. Commercial lending is more pragmatic than residential lending - many parts of the application (LVR, interest rates, fees, etc) will be dependent on the strength of the application as well as the security type (industrial, warehouse, multi units, etc)

    Here are some rough guides to LVR's depending on security:

    Strata Office - 75% LVR

    Mixed Use - 70% LVR

    Factory / Warehouse - 75% LVR

    Shop - 75% LVR

    Residential Blocks >=10 units - 75% LVR

    Car Yard - 50% LVR

    Shopping / Function Centre - 65% LVR

    Caravan Park 50% - LVR

    Motels - 55% LVR
     
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  5. Big Daddy

    Big Daddy Well-Known Member

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    Problems with Commerical Development Loans
    • Lower LVR 50% to 75%. The higher the LVR the higher the interest rate.
    • Higher Bank Valuations (2k)
    • Higher establishment fees
    • Higher ongoing fees
    • Length of loan usually <15 years
    • 2% higher Interest Rates due to risk
    • No offset accounts except Suncorp
    • Servicing: They may not allow the forcast “rent” to be used in the servicing. Also need a current lease to be in place.
    • May require presales before construction.
    • Very hard to finance properties that do not have leases or have expired lease
    • Annual reviews
    • Tax returns / ATO running statements
    Westpac and CBA are bad for commercial loans????
     
  6. chindonly

    chindonly Well-Known Member

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    Do others agree with Big Daddys 2% higher on interest rates?
    I know the commercial loans for sites are work aren't much different to resi, but there are some additional fees.
    LVR is very low though. Thoughts?
     
    legallyblonde likes this.
  7. DanW

    DanW Well-Known Member

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    You should also link to Dazzs profile and posts from Somersoft, educating, inspirational, but also entertaining!
     
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  8. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker

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    Westpac and CBA aren't fantastic for either commercial or development finance.

    Interest rates are at least 2% more expensive than residential carded rates but this applies to development finance. Commercial loans are cheaper depending on a combination of application, LVR and security.
     
  9. Pistonbroke

    Pistonbroke Well-Known Member

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    Just get creative with commercial property finance. If possible use commercial bank bills. They have some drawbacks like refinancing every 180 days bu the interest rate is a couple of % above the bank bill rate.
     
  10. Lil Skater

    Lil Skater Well-Known Member Business Member

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    Might be a little outdated, but at least people are talking!
     
  11. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    Thanks Shahin,
    Good to know this information for us newbies to commercial.
     
  12. chindonly

    chindonly Well-Known Member

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    So what are people here investing in commercially?

    Examples?
     
  13. Fargo

    Fargo Well-Known Member

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    I have found Westpac to be the best commercial lender, my broker put my loans out for tender. Westpac made the best offer by far current interest rate is 4.38% it does have about 1.1% in line fees which can vary depending on the loan limit, but it still only adds up to 0.5% more than my RPIL with BOM. They just have crappy Internet Banking with transaction limits so low it is useless, and security tokens that don't work, It not good as a transactional account.
     
  14. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker

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    What was the details of the transaction? LVR - 65%? Loan Term 15 years? Is it security purely against the commercial property or do you have resi property secured as well? What is the loan amount?
     
  15. Befuddled

    Befuddled Well-Known Member

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    Can you take out equity in commercial property in the same way as residential to use as deposits for further investments? If so, do lending policies encourage it?
     
  16. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker

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    Most lenders will allow it but its an expense process so its a last resort option. You would want to pull out equity from resi property first up.
     
  17. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Cash out on a CIP is going to potentially attract solicitors, application and valuation fees - so you'd definitely want it to be for a significant amount to justify the expense.

    Certainly possible though - and some lenders are exceptionally easy to release funds with minimal documentation.
     
  18. legallyblonde

    legallyblonde Well-Known Member

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    The LVR and the loan length seem to be the killer with commercial lending!

    Although I am glad to hear that interest rates aren't as high as I would have expected (thanks @Corey Batt )

    I had better keep saving!

    Although others were posting in a different thread that serviceability for commercial loans have been largely unaffected by APRA?
     
  19. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Commercial is unaffected by APRA and I believe will continue so - increased commercial lending is generally a good indicator of business confidence/economic health so a lot less exciting for the government organisations to limit.
     
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  20. D.T.

    D.T. Adelaide Property Manager Business Member

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    legallyblonde likes this.