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Finance Questions for Commercial Property

Discussion in 'Commercial Property' started by john3, 4th May, 2016.

  1. john3

    john3 New Member

    Joined:
    25th Jun, 2015
    Posts:
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    Location:
    Sydney
    This is to the CP Finance gurus

    1. What is the max lvr you can get for purchasing a CP. Is it 80%?
    2. My servicibility is already stretched with residential properties, would commercial lenders look at my servicibility or just the numbers on the commercial property?
    3. If I find an untenanted property and am able to negotiate a good price lets say $200K and then sign-up a tenant which increases the valuation to $300K, will the lender be willing to lend on the contract price or the updated higher valuation?
    4. It is easy to calculate the cap rate of a CP by looking at the figures for the property but how do you find out the cap rate of similar properties in the same street or neighbourhood? Is this information available somewhere?

    Thanks in advance.

    John
     
  2. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

    Joined:
    18th Jun, 2015
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    Location:
    Sydney
    Max LVR of 80% is possible but most lenders will do 70%-75% depending on the security type (office, industrial, warehouse, retail, etc).

    There are lenders that have whats called a "Lease Doc" product which allow the use of rental income provided that the income covers the interest on the loan. This product isn't the cheapest though and the LVR is 65% (La Trobe do 70% but its a tad bit pricey). Generally speaking when it comes to commercial loans the higher the LVR the higher the risk to the bank and thus the higher the interest rate.

    Commercial properties are heavily reliant on the lease agreement so must lenders will not accept the application unless there is a lease in place. The exception to this of course is if you are able to service the debt without the use of the proposed income.

    When it comes to commercial lending - don't focus on the rate. One of the most important things is the loan terms and review/valuation policies.
     
  3. john3

    john3 New Member

    Joined:
    25th Jun, 2015
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    Location:
    Sydney
    Thanks Shahin,

    So are you saying excluding the "Lease Doc" product, the lenders would require your servicibility to be good as well?

    So is there a minimum period the lease should have been in place?

    Also do you or anyone know about how to find out information about the cap rates/yields for commercial properties. So if I find a CP with a yield of 7%, how do I know if it is a good buy unless I know what similar CP's are yielding in the same area?

    John
     
  4. York

    York Finance Broker Business Member

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