Wish to purchase office space for own use in big CBD building.

[LeeJ]

Curently paying $17k PA on 40 sq.m. office space for my business. Been there 8 yrs. Thinking of purchasing about same size in big Melb CBD/St Kilda Rd building for approx $200k. You know the type. Lots of offices on same floor/common kitchenette/common gym and shower/ boardroom by the hour/ food at bottom of building.

The setup suits us 100% from business viewpoint.

Just doing initial research and know zero about commercial property.

Capital gains OK but not main concern as will use for years to come.

So do financiers look at owner/occupier more kindly for commercial (as in PPOR) and what sort of deposit does one need to be very sure of finance approval.

Credit and mortgage payments history 100%, have 2 investment properties at high LVR (cannot get LOC from them) but no probs as have $40k cash and in fact thinking of selling one of the props for about $550k.

Many thanks

Lee

 

[Aaron Sice]

Research buying it in one entity and renting under your business name.

That way, you get the benefits of both sides of the coin.

 

[LeeJ]

Research buying it in one entity and renting under your business name.

That way, you get the benefits of both sides of the coin.

Ta - understood.

But initially interested in what LVR banks offer.

 

[younguns]

Research buying it in one entity and renting under your business name.

That way, you get the benefits of both sides of the coin.

Don't mean to hijack the thread but does this work for resi too Aaron? For example, purchasing a property in a trust and renting it in your business name (if you work from home?). Regarding LVR for commercial, we have been told 30-35% plus costs!

Cheers
YG

 

[Aaron Sice]

Don't mean to hijack the thread but does this work for resi too Aaron? For example, purchasing a property in a trust and renting it in your business name (if you work from home?). Regarding LVR for commercial, we have been told 30-35% plus costs!

Cheers
YG

Maybe, but a business renting a resi house? Could be seen as supplying a fringe benefit.....I doubt it would work in the suburbs but somewhere zoned mixed use like subiaco or fremantle etc it could work.

 

[younguns]

Maybe, but a business renting a resi house? Could be seen as supplying a fringe benefit.....I doubt it would work in the suburbs but somewhere zoned mixed use like subiaco or fremantle etc it could work.

Fair point. I suppose our 4x2 plus study with pool in Duncraig is not the typical office

 

[Peter_Tersteeg]

You'd probably get a 70% LVR against the value of the property. For smaller deals the smaller lenders tend to be a bit more accomidating.

Loan terms are usually 15 years, but this can be longer. 5 year interest only is available. The loan structure could have an effect on the interest rate.

Lenders will join the dots if you own via trust and rent it from there. Thus you'll need to provide business financials to demonstrate affordability.

Lenders will also want to see that you can maintain your personal commitments so the overall 'proof of income' isn't likely to be much different to a standard resi loan.

Purchasing through a trust is a good idea. There are some tax advantages, but the main reason is to separate the property from the business assets. If the business gets into trouble, the property isn't on the line.

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Some people do rent their residential property back from their own trust. Your accountant would likely advise you to have more than one property in the trust to show it isn't the sole purpose of that trust. You also need to have a formal lease in place and actually make the payments to deomonstrate it's at arms length. You should consult your accountant for specifics.