What is it banks look for when lending for commercial properties?

The features you’re searching for in an office aren’t necessarily what the creditor is searching for in a suitable security.

However, once the valuer does assess the property, location is an integral element in working out whether the property will interest a broad marketplace should the property have to be sold in case of default.

Offices near the CBD have a higher probability of being accepted because they are generally close to transport links and other infrastructure such as adequate parking.

Unlike gas stations, mechanical workshops and other forms of specialised property offices are considering standard security so that they tend to be more readily accepted.

In saying that, lenders will be considering your application with a resume type approach if you are thinking about running your company from the premises.

They need to see your company can stay afloat by assessing the financials of the company you have been running up until this point.

The will usually be in the kind of Business Activity Statements (BAS), an Australian Taxation Office (ATO) tax gateway printout or bank account transactions for the previous three to six months demonstrating your company’s profit and loss.

You’ll also have to offer a business plan detailing cash flow forecasts, market competition and your business model. Fortunately, though, we know of creditors that will not undertake a yearly review of your company along with you providing a business strategy.

What if I am just investing?

If you are buying an office and leasing it out, then experience is not as necessary although you will want to prove that you have a reliable tenant and that you are in a stable financial position to take care of any changes in the marketplace.

The bank will also need to see that you get a stable tenant who’s thinking about staying at the one location for some time.

High vacancy rates can turn off lenders approving your mortgage, and it is something that influences properties in the office area.

In today’s internet world, direct competition from a physical location standpoint is not as much of a concern as it once was when purchasing an office.

In saying that, offering a unique service in a very low competition environment remains essential.

Opening your real estate agency up the street from an established franchise such as L.J. Hooker is a red flag for most creditors to steer clear of your proposed purchase.

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