Join Australia's most dynamic and respected property investment community

Finance question on mixed residential / commercial use

Discussion in 'Commercial Property' started by Lib04, 17th Apr, 2016.

  1. Lib04

    Lib04 Member

    Joined:
    27th Feb, 2016
    Posts:
    6
    Location:
    Gold Coast
    Hi,

    I am doing some very early / preliminary research and wonder if anyone can offer advice.

    My husband and I have two young kids. He is on a full time salary of approx 100k. I run a part-time mobile health business that is growing (but only earning me about 40k at present), and would like to investigate the options of setting up a large clinic as a bit of a pivot. We have 2 residential investment properties & are currently renting a house due to a lifestyle move. I like the idea of buying a property we can live in AND use for commercial purposes. We would consider selling both properties to finance it if we felt the opportunity was good enough, but obviously would prefer to keep them. If we did sell, it would give us about 300k to put towards it. Putting aside commercial use zoning etc and the pros and cons from living where you work, I want to know:
    - how serviceability is normally assessed if part/all of the building is to be used for a new business - can they assess potential business income based on the new business model? Or do they only assess on current income?
    - any other words of wisdom you might have about this scenario

    I look forward to hearing your input.
     
    Last edited: 17th Apr, 2016
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,943
    Location:
    Sydney
    Resi lender won't like it if running a busniess there, so you would be looking at commercial finance probably.

    They won't treat it as income producing as it will be owner occupied.

    as an aside, do you think it a good idea to run a business from home like this - lose the full cgt exemption. What about renting and being able to claim the rent?
     
  3. Lib04

    Lib04 Member

    Joined:
    27th Feb, 2016
    Posts:
    6
    Location:
    Gold Coast
    Yes, I know you're right Terry. Brain vs heart battle after seeing an amazing property today. I think our best move is still to lease commercial space and buy our next house for residential use separately.
    Thanks for the reality check
     
  4. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,569
    Location:
    Adelaide, SA
    Commercial space is in area we've used Corey for in the past
     
  5. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

    Joined:
    14th Jun, 2015
    Posts:
    2,098
    Location:
    Sydney & Adelaide
    Yes sounds like it would be a commercial loan. Would it be a commercial or residential security? From what I recall of recent conversations with finance people, 70-80% comm finance on resi security is possible.
     
  6. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,167
    Location:
    Adelaide, SA
    If the property is zoned commercial, lenders generally will NOT want to touch it as residential lending. Likewise if they have a sniff of the property being used for a business capacity.

    Dependent on financials, security location you're looking at 70-80% LVR, rates will be likely be floating high 4's to low 5's unless there's something out of the norm with the transaction. (location, security, financial details)
     
  7. Simon Moore

    Simon Moore Mortgage Broker - Melbourne Business Member

    Joined:
    4th Mar, 2016
    Posts:
    220
    Location:
    Melbourne
    Are you a doctor, physio ect? Could be eligible for a special commercial loan if that's the case.
     
  8. Lib04

    Lib04 Member

    Joined:
    27th Feb, 2016
    Posts:
    6
    Location:
    Gold Coast
    Thanks everyone for your input. Yes Simon, I'm a physio. Does that change things much?

    It sounds like it would definitely be considered a commercial loan. Apologies for my ignorance, but how does the lender actually determine loan amount / serviceability if business to be run from the property has not started? Say we sold one property to give us 190k deposit / capital (and kept the other IP at 80% LVR) - is the new building itself used as security with our current income the only thing to be factored into serviceability (along with all the usual things like expenses, dependents etc)?
     
    Last edited: 22nd Apr, 2016