Important considerations before purchasing commercial property

Important considerations before purchasing commercial property

Purchasing commercial property follows a different process to that of securing a home loan.

When you buy a house, you usually consider your desired lifestyle and budget then work backwards to determine how much you can borrow and seek a pre-approval. The house you buy – assuming you live in it – is more than just the bricks and mortar. As your home, it will become an integral part of your happiness. A place where you can live, laugh and learn, and create your memories.

When it comes to commercial property on the other hand, while for many people their place of work is often a second home since so much time is spent there, acquiring commercial property to run your business carries a significantly different meaning.

Commercial property ownership will assist you in either maintaining or increasing your revenue. So when it comes to how much you can afford to spend on the purchase, there’s an array of additional factors that are investigated when looking at a commercial loan.

If you are considering purchasing a commercial property, keeping the following factors top of mind is highly important.

Property type

If you’re already leasing a commercial suite for your practice, you may already have a strong idea of how much space your practice requires. Plus, you may also have preferences about the building features or facilities that you have been accustomed to and definitely require going forward, or have always lacked now been added to your must-haves list for your new commercial property.

If you’re unsure of how much space you require, you may need to engage a commercial property agent to be shown some real spaces and get a sense of how much difference

In addition to size, considering whether you want a suite versus a freestanding property is important. Will the neighbours around you will influence your practice’s success? Are you choosing a property in an area zoned for commercial purposes? Does it offer accessibility for patients that may not be able to get up a flight of stairs or fit a wheelchair or mobility scooter?

Location, location, location

Might sound obvious, but location is a key factor when it comes to the commercial property assessment. There is no point buying a property that won’t be easy for your patients to access or lacks in public transport options.

You may even consider paying a slight premium to be in a location that is more convenient for you and your local community. It’s important to consider the needs and wants of your patients, as the top goals are to satisfy your patients so that they will continue to value your service, resulting in repeat business and long-lasting patient relationships.

Another key location-related consideration is the neighbouring competition. Often, nearby medical are beneficial for ease of access to referral colleagues and patient convenience. However, if a geographic area is cluttered with dental practices, the appeal of the location to a lender may be less so.

Loan repayments versus lease payments

We most commonly find that clients looking to move from a lease arrangement to commercial property ownership are striving to better secure their future.

One of the ways to access a client’s suitability to service a mortgage is comparing it to their current lease arrangement. Quite often, the loan repayments will be similar to that of a lease payment. If you find a suitable property and the loan repayments are comparable to your lease payments, then chances are you’ll be successful in gaining financial assistance to purchase the desired property.

Additional costs

Owning commercial property means you are financially responsible for maintaining that property.

From fitout to premise upgrades, internal renovations, strata fees and utilities, these are all ongoing costs that you can no longer rely on a landlord to help with. A rainy day fund for unexpected repairs will definitely come in handy, otherwise consider an overdraft facility for readily available cash.

Also remember that at the time of purchase, you’ll be paying the transaction costs like stamp duty, valuation and solicitors fees.

Purchasing structure

An important consideration is “who” borrows the funds.

At Credabl, we have clients who borrow as individuals, partnerships, companies, family trusts, unit trust and SMSFs. Credabl can deal with all these structures however, each one has its own lending requirements.

Your accountant will be able to advise on the most favourable structure for your specific circumstances. The team at Credabl can also discuss the requirements from a lending perspective.

Buying your own practice premises is a significant step in the growth of your business. Not only will it rid you of that nosey landlord, but it’s ultimately an investment in your business. Owning the property will give you certainty of tenure and will allow you to invest in your rooms with the knowledge that you’re adding value to your property and not someone else’s.

But you need to start off on the right foot – and by right foot we mean right finance. Securing the right financial structure from the beginning means you can avoid any pitfalls and complications. At Credabl, we also partner with you from day one to make sure your commercial property acquisition is an investment in your future. From here, we’re with you every step of the way.

Whether you’re new to seeking commercial finance or need something else, we’re available to chat live on our website www.credabl.com.au or you can call one of our specialist lenders on 1300 27 33 22.