Borrowing for Commercial property

[TSwizzle]

Hi all
First time commercial property investor, and would like to know from those of your experienced in this area if banks usually allow an offset account to go with the commercial property loan? such as what residential ones offer.

Asked a few and they have said this is not a feature offered when it comes to business loans?

 

[Aaron_C]

Commercial banks don't have offset accounts, that is a residential home loan invention.

 

[TSwizzle]

ok thanks Aaron.

If you don't need the money in the short term, do you think it's ok to purchase a commercial property outright with your own funds for investment purposes?

 

[alexlee]

If you don't need the money in the short term, do you think it's ok to purchase a commercial property outright with your own funds for investment purposes?

Not a great idea. What happens if you want to use the money for private purposes? Buying your own home, a car, whatever?

It's not a short term or long term issue.

 

[Colin Rice]

ok thanks Aaron.

If you don't need the money in the short term, do you think it's ok to purchase a commercial property outright with your own funds for investment purposes?

If you want to buy residential property in the future using equity in a commercial property your options will also be limited.

Best to borrow the max amount and use your cash elsewhere or preserve for other purposes.

 

[Terry_w]

ok thanks Aaron.

If you don't need the money in the short term, do you think it's ok to purchase a commercial property outright with your own funds for investment purposes?

Not good for 2 main reasons:
1. Asset protection
2. Tax.

 

[TSwizzle]

thanks for the input everyone...
I'm probably in an uncommon position where I'm in the lower tax brackets <30k,no income or salary and after a better return than bank interest etc...
I have liquidity and if I were to buy a property outright I would still have left over 60%of total liquid funds remaining.
I wanted to borrow but understandably none of the banks will give me a loan given my circumstance.

Does anyone see what other options I have besides ofcourse obtaining employment to get a loan, if I wanted to get into the property market?

 

[Aaron_C]

I'm sure they will give you a loan. Just depends on how much. Don't forget if you buy a commercial property you can use that rental income for servicing.

 

[Terry_w]

thanks for the input everyone...
I'm probably in an uncommon position where I'm in the lower tax brackets <30k,no income or salary and after a better return than bank interest etc...
I have liquidity and if I were to buy a property outright I would still have left over 60%of total liquid funds remaining.
I wanted to borrow but understandably none of the banks will give me a loan given my circumstance.

Does anyone see what other options I have besides ofcourse obtaining employment to get a loan, if I wanted to get into the property market?

Think outside the square.

consider gifting the money to a discretionary trust. then borrow it back to buy the property. Trust can take a first mortgage.

This provides asset protection and tax advantages

 

[TSwizzle]

thanks guys, is there somewhere on this site where I can find out more about trusts ?
Incase you haven't already guessed I am completely new to property investment and I have definitely heard some people saying not to buy IP in my name

 

[Terry_w]

thanks guys, is there somewhere on this site where I can find out more about trusts ?
Incase you haven't already guessed I am completely new to property investment and I have definitely heard some people saying not to buy IP in my name

just do a search. in every second post of mine i mention trusts as do many others.

 

[TSwizzle]

thank you Terry will have a look now...

 

[Bird Dog]

Hi TSwizzle.

We have a commercial loan with the Commonwealth and simply put the $$$ left over from the positive gearing each month into the loan account which offsets the total loan balance thus reducing the interest.
I don't see any reason why you couldn't do this with your equity however it would all come down to the the loan product.

This does not however address the issue you may face with loan serviceability and your current income status.

I suggest you look into Terry's trust idea as that may tick more boxes for you.

cheers
Bird Dog

 

[Redwood]

thanks for the input everyone...
I'm probably in an uncommon position where I'm in the lower tax brackets <30k,no income or salary and after a better return than bank interest etc...
I have liquidity and if I were to buy a property outright I would still have left over 60%of total liquid funds remaining.
I wanted to borrow but understandably none of the banks will give me a loan given my circumstance.

Does anyone see what other options I have besides ofcourse obtaining employment to get a loan, if I wanted to get into the property market?

Hi TSwizzle, are looking at investing personally or through your superannuation?

 

[wobblysquare]

Offset account

That sounds an awful lot like an offset account against a commercial property ! At what LVR and interest rate are commercial loans being made at the moment?

Cheers Wobbly

 

[pinkboy]

That sounds an awful lot like an offset account against a commercial property ! At what LVR and interest rate are commercial loans being made at the moment?

Cheers Wobbly

That doesn't sound like a separate offset account - sounds more like pumping the extra $$$ into the loan account and available for redraw.

pinkboy

 

[luce.rocks]

Thought I'd ask here instead of starting a new thread.

What are normal commercial property loan term lengths? 30 years like resi? Or shorter?

 

[Aaron_C]

Thought I'd ask here instead of starting a new thread.

What are normal commercial property loan term lengths? 30 years like resi? Or shorter?

15 years with 5 years interest only if needed. Adelaide Bank and a few others can do 25 years.

 

[luce.rocks]

Thanks Aaron!

 

[Colin Rice]

Sometimes as short as 5 depending on the dynamics of the deal.