Purchasing commercial property is a significant financial step, especially for first-time buyers. Whether you’re looking to expand your business or invest in real estate, understanding the purchase process and the various financing options available is essential. In this guide, we’ll walk you through key considerations, from traditional and alternative financing options to the often-overlooked 10% GST (Goods and Services Tax) on commercial property purchases. First-time buyers are often surprised to learn that GST must be paid upfront*, which is why we’ll also explore how short-term GST funding can help bridge the gap.
Once you find a property, you’ll need to conduct thorough research on the property’s location, potential rental yield, and zoning regulations. From there, you’ll likely engage professionals including a real estate agent, solicitor, and accountant to handle the due diligence, including title searches and contract negotiations. After making an offer and signing the contract, your deposit is required, along with additional costs like stamp duty, legal fees, and GST on the commercial property purchase.
Before purchasing a commercial property, it’s important you first determine your budget and financing options. This may involve a traditional bank loan, non-bank lenders, or specialised financing. If you’re a first-time buyer, you might be surprised to learn that in Australia, buyers must pay 10% GST on top of the commercial property’s purchase price. Most bank loans don’t cover this cost and require you to come up with this amount yourself, so we’ll look at short-term GST loans as a solution.
The most common route for commercial property financing is through a traditional bank loan. These loans often come with lower interest rates, but the approval process can be lengthy and stringent. Banks usually require a substantial down payment (typically 30%-40%), detailed financial statements and a solid credit history.
Pros:
Cons:
Non-bank lenders provide an alternative to traditional bank loans. These lenders can be more flexible, approving loans for buyers who may not meet strict bank criteria. However, non-bank loans usually come with higher interest rates to compensate for the added risk. Some offer specialised loans tailored to commercial property buyers that come with added benefits, like lower down payment requirements or flexible repayment terms, specifically designed for purchasing or developing commercial properties.
Pros:
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First-time buyers often overlook the GST factor when purchasing a commercial property in Australia. Buyers must pay 10% GST on top of the property’s purchase price and most bank loans don’t cover this cost.
Property Credit offers a short-term financing solution that covers 100% of the GST. This is especially helpful as the GST amount (in most cases) is refundable from the Australian Tax Office (ATO), but the process can take up to 120 days, depending on your BAS cycle. During this period, the strain on your finances can cause major cash-flow headaches, which may jeopardise your transaction or future investments.
This solution is ideal not only for first-time buyers but also for property professionals like sales agents, developers, and anyone involved in purchasing land, new builds, or development sites.
*when purchasing a vacant property.
Visit property.credit for more information on our services or you can contact us on 1300 829 536 (au) or 03 668 2144 (nz).
This article is for general information purposes only and is not intended as financial product advice. Consider seeking independent financial advice that relates to your individual circumstances.
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