Financing question.

Say property is 5m. Income is 500k pa.

Say I have a 30% deposit.

Will banks finance without looking at personal income? Is can it be financed based solely on the current rental income?

Also, can I buy in name of company without being a personal guarantor based on the deposit which would be the bank's equity?

Thanks. I've bought lots of residential but this would be first commercial, and via a holding company.

 

Short answer is no. longer answer is noooooooooo.

The lenders will look at personal income in all cases. But where the rent is enough to service it may be possible - very difficult though.

There was only one lender than i knew of that didn't ask for a person guarantee on low lvrs, but I believe they have changed policies and do now.

 

Yes - several lenders have a commercial product called "Lease Doc" - no income docs are required when the lease agreement in place covers the interest repayments.

Here is an example of La Trobe's product (which we regularly use)

La Trobe Financial - Lease Doc

LVR is 70% but the issue is going to be around the loan amount and potentially security.

What is the security?

 

I stand corrected - i was only thinking residential properties, but with a $5mil purchase price you are probably considering commercial.

 

Or a run down joint in one of Sydney's less salubrious suburbs.

 

The original post indicates this will be a commercial purchase

 

Quite a few lenders will touch on this - I wrote a post on this a while ago:

Lease Doc Commercial - Or How I learned to love Lease doc to continue investing

The main things needed to get this over the line will be:

• the current lease terms - how long remaining etc
• net servicing within the purchase
• security details - location, security type etc

Based on the income given in the original post that shouldn't be an issue, as long as it's acceptable income as per the above.

 

Thanks guys. Very helpful. I looked at the Latrobe website. They are asking over 7%pa, which seems nuts! Any suggestions on a lender that offered such loans at competitive rates?

 

Lease docs are great but what happens once the lease runs out or say the tenant goes broke, shuts up (think masters) and no money coming in . Locating a new tenant could take months on end.

Sounds too bloody risky.

 

Property has 13 tenants. I doubt all 13 would not renew at once ... So no not risky, especially if you have additional sources of income or cash in the bank.

 

Yes i agree you're pretty safe with 13 tenants. Unless they all turn on you!

 

Anchor tenant plus small tenants? Retail?

Should get in the 5.xx% with a decent application.

Hit @Corey Batt up. He sorted my commercial purchase.

pinkboy

 

Yep. . @Corey Batt is excellent for this kind of deal.

 

It's going to come down to the loan amount needed - some lenders will certainly price a lot lower with their lease doc products but will have restrictive max loan limits etc. Though I'm fairly confident a strong offering could be provided for a scenario like this so long as the other factors are strong.

If this is a serious purchase, I'd suggest getting specific information from a broker - that way any challenges can be identified early on and mitigated before you proceed any further with the potential purchase.

 

Yup, that has been my experience as well.