Commercial Property Investment Loans

Retail and strip-shop investments

Retail assets range from a single strip-shop tenancy through to neighbourhood centres. Lender appetite varies by tenant mix, location and lease structure. Strong, well-located retail with non-discretionary anchor tenants (such as supermarkets or pharmacies) is usually well supported. Discretionary retail with shorter leases or weaker covenants will typically attract a more conservative LVR and tighter conditions.

Industrial and warehouse investments

Industrial property includes warehouses, distribution centres, light manufacturing and self-storage. This sector has been one of the most actively financed by major and non-bank lenders in recent years, particularly for well-located logistics assets with sound leases. LVRs are typically similar to office, with longer net leases and strong tenants supporting more favourable terms. (A net lease is one where the tenant pays most or all outgoings on top of base rent, which is generally easier for a lender to underwrite than a gross lease where the landlord absorbs them.)

Mixed-use and showroom investments

Mixed-use properties combine commercial uses (retail, office, showroom) with residential or other components. These assets need careful structuring because lender policy varies depending on the residential weighting, the zoning and how each component is leased. We’ll match your scenario to lenders comfortable with the specific mix you’re purchasing.

Medical and specialised investments

Specialised commercial property includes medical suites, childcare centres, service stations, hospitality venues and other use-specific assets. Because these are harder to value and often cannot easily be re-tenanted to a different use, LVRs are typically lower (commonly 50 to 60%) and the lender panel is narrower. Specialist commercial lenders are often more comfortable here than the major banks.

Not sure which asset class fits your strategy? Call us on 1300 562 696 and we’ll talk through the trade-offs before you start hunting for a property.

How Lenders Assess Your Investment

With residential investment lending, serviceability is largely about your personal income. With commercial investment lending, the property’s lease income often does most of the heavy lifting. Here’s what lenders focus on most:

Tenant strength and lease length

Lenders look closely at who is paying the rent and how long they’re committed to the property. A national tenant on a five to 10-year lease with options carries far less risk than a single-trader tenant on a short lease. Strong covenants such as Australian Securities Exchange (ASX)-listed companies, government entities or large national chains typically support higher LVRs, longer terms and better rates than weaker covenants on shorter leases. (“Covenant” in this context just means the strength and reliability of the tenant’s promise to pay rent.)

Yield, outgoings and capitalisation rates

Commercial property is usually valued and assessed using yield rather than comparable sales alone. Gross yield is the rent divided by the price; net yield is rent less outgoings, divided by price. Lenders typically focus on net yield because it reflects what actually services the loan after recoverable and non-recoverable outgoings.

Capitalisation rates (or cap rates) are essentially the same calculation as net yield, just expressed from the lender’s and valuer’s perspective. Understanding cap rates helps you read the market the way lenders and valuers do.

Single-tenant vs multi-tenant assets

Single-tenant assets concentrate risk: if the tenant leaves, your income drops to zero overnight. Multi-tenant assets spread that risk across several leases, but they’re also more complex for lenders to analyse. Lenders apply different stress tests to each, and we’ll model the income as the lender will so you know what to expect during credit assessment.

Sector risk, vacancy and lease type

Lenders also weigh sector risk (some industries are seen as more cyclical or vulnerable than others), local vacancy trends and the type of lease. Triple-net leases, where the tenant pays most outgoings, are generally treated more favourably than gross leases where the landlord absorbs them. Rent reviews, options and incentives in the lease all factor in too.

Reading the Lease the Way Lenders Do

On a commercial investment property, the lease is the asset. Two properties can look identical from the kerb and have very different financeability based purely on what the lease document actually says. Here are the lease clauses we walk through with every client before they sign a contract:

Lease term, expiry and options

Lenders look at the unexpired term first. A lease with eight years to run is a different conversation to one with 18 months. Options to renew help, but lenders generally weight committed term more heavily than option periods, because the tenant may simply not exercise the option. If the lease has only a short tail, the loan term, LVR and rate may all tighten.

Rent reviews and indexation

How does the rent move over the life of the lease? Consumer Price Index (CPI) reviews, fixed annual increases (commonly 3 to 4%), market reviews at option exercise and ratchet clauses (which prevent rent at review from dropping below the existing rate) all affect projected income. Lenders model future cash flow, so a strong review structure can lift confidence in the asset.

Outgoings recovery

Who pays the council rates, land tax, insurance, repairs and management fees? On a triple-net or fully recoverable lease, almost all outgoings are passed through to the tenant, leaving the landlord with the net rent. On a gross lease, the landlord absorbs them. Same headline rent, very different net yield. We always work through what’s actually recoverable, not just what the lease summary says.

Make-good and lease incentives

Make-good clauses spell out what condition the tenant must return the property in. Lease incentives (rent-free periods, fit-out contributions) are commonly used to attract tenants but can mask the true effective rent. A property leased at $100,000 a year with six months’ rent-free and a $50,000 fit-out contribution doesn’t produce $100,000 of cash flow in year one. Lenders look through to the effective rent, and we model it the same way.

Permitted use and zoning fit

The lease’s permitted use clause needs to align with the property’s zoning and any council conditions. A mismatch can affect the property’s value at sale and the lender’s willingness to finance the asset. This is one of the most common things missed in due diligence on first commercial purchases.

Considering an offer on a property? Send us the contract and the lease. We’ll read both and tell you in plain English what’s financeable, what’s marginal, and what to negotiate before you sign.

Typical LVRs and Commercial Loan Terms

Every commercial investment loan is priced individually. The right structure depends on the property, the lease, your financial position and the lender. As a starting point, the table below gives a working guide to what’s commonly available across asset classes:

This is a general industry guide, not a commitment. The specific LVR, term and rate available to you will depend on the property, the lease, the lender and current market conditions. We’ll come back with terms tailored to your actual scenario.

Worked Example: $1M Investment Property

Numbers tend to land harder than principles, so here’s a simplified illustrative scenario. The figures below are not a quote and will not match your actual transaction, they’re purely to show how the moving parts connect:

• Property: $1,000,000 industrial unit, single-tenant, five-year lease with two five-year options
• Gross rent: $70,000 per annum (a 7% gross yield)
• Outgoings paid by landlord: $5,000 per annum
• Net rent: $65,000 per annum (a 6.5% net yield)
• Loan: $700,000 (70% LVR)
• Indicative interest cost: around $52,500 per annum on an interest-only basis at an illustrative rate (your actual rate will differ)
• Pre-tax cash flow: around $12,500 per annum after interest, before any other costs

That illustrates why lease income, yield and LVR matter so much for investors. A change in any one of those (a lower yield, a tighter LVR, a higher rate) flows straight to the cash flow line.

The point of working with a specialist finance broker in Melbourne is to find the lender combination that gives you the best version of those numbers for your actual property.

Want to model your own scenario? Call us on 1300 562 696 and we’ll run through it with you.

Why Investors Work With Us

Most commercial investment deals don’t fall over because the property is wrong. They fall over because the finance was structured for the wrong lens, or because something in the lease or the contract wasn’t flagged early enough. Where we add the most value is reading the asset and the deal the way a credit team will read it, before the contract is signed and before the application is submitted.

We read the deal the way a credit team reads it

Lenders aren’t looking at your property the way you are. They’re modelling worst case (tenant leaves, vacancy lasts 12 months, rent re-leases at 10% below current), stress-testing rates, and asking whether the asset stands up under scenarios you may not have considered.

Our job is to model the property the same way before you commit. That means reading the lease in full, understanding the tenant covenant, modelling effective rent after incentives, and identifying which lenders will be comfortable with the specific deal in front of you.

We compare lenders in parallel, not one at a time

Going direct to a single bank gives you one credit policy, one risk appetite and one view. If the asset, the lease structure, the entity or the wider portfolio sits outside that lender’s preferred box, the answer is no. A specialist commercial property investment broker compares multiple lenders in parallel and presents the application to the lender most likely to approve at the right terms. For complex investment scenarios (multi-tenant assets, mixed-use, trusts, SMSFs, lease-doc), that difference often determines whether the deal happens at all.

We disclose how we’re paid upfront

For most commercial investment transactions, Loanworx is paid an upfront and trail commission by the lender after settlement. The commission typically does not change the rate or fees you pay. In some cases (typically development funding, private lending and certain non-bank facilities), a fee for service may apply, and we’ll always disclose it in writing before any work begins. No surprises.

Our Commercial Investment Lender Panel

It’s important to us that we offer Melbourne investors a wide range of lender options. With access to over 1,500 products spanning the major banks, plus a deep panel of non-bank and specialist commercial funders, we can compare your current bank against a broad set of alternatives, and tailor a structure that works for your asset, your lease and your long-term portfolio strategy.

Our experience covers the full range of investment scenarios, from straightforward office and industrial purchases through to more complex multi-tenant retail, mixed-use, specialised assets and SMSF acquisitions. Where one lender’s policy doesn’t work, another often will, and matching the right scenario to the right lender is where most of the value is created.

Our Process for Investors

Investment finance isn’t really a five-step transactional process. It’s a strategy conversation, then a property conversation, then a finance conversation, with each stage shaping the next. Here’s how we typically work with investor clients:

• Pre-purchase strategy. Before you have a specific property in mind, we sit down and map your investment goals, current portfolio, structure and serviceability. The aim is to understand what you can realistically borrow, what asset classes fit your strategy and what your existing exposure looks like to lenders. No cost, no obligation.
• Property and lease due diligence with a finance lens. Once you have a specific property in mind, send us the contract and the lease. We read both and flag what’s financeable, what’s marginal and what to negotiate before you sign. This is often the most valuable step, and it happens before any application is lodged.
• Lender selection. We compare your scenario across our panel and shortlist the lenders most likely to approve at terms that suit you. For more complex deals, we may approach two or three lenders in parallel to test policy.
• Structure and submit. We prepare and lodge the credit submission, including supporting analysis where helpful. We negotiate the LVR, term, rate, fees, conditions and any required guarantees, and keep you informed at each stage.
• Settlement. We coordinate with the lender, your accountant, your lawyer and any SMSF adviser through to settlement. The aim is a clean handover with no last-minute scrambles.
• Portfolio review. Your portfolio changes over time, and lender pricing changes constantly. We check in periodically so you stay on terms that still suit your strategy, and flag opportunities to release equity for the next purchase when they make sense.

Ready to Talk Investment Finance?

Got a property in mind, or thinking about your next one? Bring us the contract, the lease and the numbers, and we’ll tell you in plain English what’s financeable, what’s marginal, and where the risks sit. If you’re earlier in the journey, we’ll start with strategy and work backwards from there.

Call us on 1300 562 696 or book a free, no-obligation chat with our team. The earlier in the deal we’re involved, the more value we can add.

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