Residential Property with a Commercial Shop

Recently came across a residential property with a commercial shop. It was advertised with calling small business owner to move your business here. STCA of course. Seems not quite ready for the commercial property. But would be good if can get dual income.

We want to buy our next investment property. If we go for a property like this, how can we find out if business is allowed or not? And what kind of business allowed? Knew little to none on commercial property. But assume a restaurant would have different requirements to meet from an accounting firm. How can the landlord get approval on the business can be run on the premise?

If it’s sold for owner occupied and say the owner use the shop to run his/her own business, e.g., hair salon (as sometimes see those shops in residential area), does it make difference in terms of council requirement?

What kind of zoning information I need to look for?

Appreciate your input to enable a newbie to know where to start.

 

GST issues can impact commercial or mixed use property

 

Lenders hate mixed security too, prepare for a sub 60% lvr

 

Correct - most aren't too keen on them. Straight residential lenders generally don't like them because of the commercial component.

Get specific advice on the lending side of this as you don't want to be signing up for a purchase that you might not have the funding ability for OR there may be niche options available to you which can be explored instead of scrambling at the last minute for finance.

 

Thanks all for your input. Sounds like the lending is less favourable by lender comparing with loan for residential only or commercial only property.

 

Probably a little late to this, but Corey is right. Banks get nervous because they dont want to breach NCC. A single word of commercial and they will revert you to a business lender.
if it goes to a business lender (and they follow NCC) you need to prove that the purpose of the business loan is more 50% for 'business purposes' so that NCC isn't breached.
Hope this helps @MyCastle

 

Westpac and St George both do residential lending for mixed securities provided its one shop and the residential space is either at the rear or on top (shop top housing). Couple of things to note:

1. Max LVR is 60%
2. You will need to cover the extra valuation cost (its not that much though)
3. The banker or broker will need to massage the deal as credit don't encounter these types of applications regularly and most are clueless on the fact that they can actually do it without exception

If you want to do it at a higher LVR then you can do it under commercial lending at 80%, no annual reviews and 20 year loan term. Obviously the fees and interest rate is going to be considerably higher than the residential product.

 

The lender wont fund any GST so consider that too. Any GST that may be creditable needs to be funded by the buyer. Sometimes the going concern basis avoids the worry BUT seek advice as a vendor claimto going concern isnt a guarantee

 

I have found a beautiful old house that is zoned Commercial (CZ1). I have an idea for a business to operate out of it, so I wouldn't be intending to use it for residential purposes. I've read that if the property is zoned CZ1 then I would need to engage a commercial mortgage broker as I would be required to obtain commercial finance, not resi, even though it looks like a house (if that makes sense)...

Does finance for something like this always rely solely on the zoning of the property? I'm assuming I would be looking at say 70% max LVR too for a commercial loan?

Is it possible to get finance with just a business plan/case presented for what type of business will operate from here? Obviously I know I will need 30-40% deposit, and I also have a full-time job elsewhere.

Thanks for any assistance!

 

This is an old thread and an interesting question @MyCastle. Putting all the finance related queries aside - looking at it from a zoning perspective ... it looks like you need to check with the council. For example, our council has a range of questions across will you operate a health / beauty/ accommodation service, will you serve food/alcohol on premises, operating hours and permitted land use.
Looks like as long as it zoned commercial and the business can show the correct registrations and training - you seem to get the go-ahead. happy to be corrected on this.

Care to share an update @MyCastle

 

@Bombers86, as with any finance approval one of the levers is proof of serviceability.
I would hazard a guess that a business case will not be enough to secure funding, and you will need to rely on your full time job income to qualify.
It does seem like a double edged sword to start a new business and buy a property at the same time. Especially when you have not qualified the business demand, viability, cash flows, etc. Happy to hear your thoughts @bom

 

if i have a residential investment property with 50% LVR, and convert dwelling use to offices/consulting rooms but the zoning stays the same, do/can i convert the residential loan to commercial?

 

Why would you want to? You probably enjoy a lower interest rate, higher LVR, absence of annual reviews, paying for valuations etc only to swap for a 65% LVR and having to enjoy paying for things that the residential loan covers.