Mortgage broker West Perth

Buying the suite you have been renting

A lot of West Perth's tenants are the sort of business that eventually buys. Consulting rooms and specialist medical suites, accountants, engineers, geologists and the small resources offices along Colin Street and Ord Street tend to stay put for years before someone works out what owning the floor would cost.

A strata office suite is not an apartment with a desk in it. It is commercial security, which means a shorter loan term, a lower lending ratio and a valuation built on rent and comparable leases rather than on what the unit next door sold for.

Owner-occupiers usually get a better hearing than investors on these files. Where the premises will house your own trading business, some lenders will weigh the strength of that business rather than looking at the property on its own.

1. 1

   Decide who is actually buying

   You personally, the trading company, a family trust or the super fund are four different applications. The entity changes the lender, the deposit and the paperwork, so settle it with your accountant first.

2. 2

   Have the suite valued on the right basis

   A commercial valuer looks at the rent, the lease and how much comparable floor space sits vacant nearby. Vacant possession and an income-producing tenancy can produce quite different figures for the same suite.

3. 3

   Plan for a larger deposit over a shorter term

   Commercial lending commonly runs at a lower ratio and over fewer years than a home loan. The same borrowed amount therefore costs more each month, and the cash you need up front is bigger.

4. 4

   Bring the business figures, not just the personal ones

   Financials, tax returns and BAS for the trading entity carry most of the weight here. Getting them together before we approach a lender is what keeps a commercial file to a sensible timeline.

Rent reviews and lease expiries are worth mentioning early too. If the suite is tenanted rather than owner-occupied, a lender reads the covenant behind that lease as carefully as it reads you.

Office property inside a self-managed super fund

West Perth is one of the few parts of Perth where the super fund question is about commercial property rather than a house. A business owner who has paid rent on the same suite for a decade eventually wonders whether the fund could hold it instead.

The super rules treat business premises differently to residential property, and a fund can generally own premises used by a related business and lease them back at a market rent. Whether that suits you is a question for your accountant or a licensed adviser rather than for a broker.

What we handle is the borrowing, and it is a narrower market than most people expect.

• Far fewer lenders write self-managed super fund loans, and their appetite changes without much notice
• The borrowing is limited recourse, with the property held through a separate holding trust
• Lending ratios are commonly lower than on an ordinary commercial loan, so the fund needs more cash at settlement
• Many lenders want the fund to hold a buffer after the purchase rather than spending down to nothing
• Serviceability is assessed on contributions and the lease income, not on your personal salary

The residential side, and what West Perth clients ask us for

West Perth is not all offices. Apartments run along Mount Street, Kings Park Road and Outram Street, and the streets climbing towards Kings Park still hold a pocket of large older houses on generous blocks.

The apartments carry the usual inner-city policy: a minimum internal living area, caps on how many loans one lender will write in a single complex, and strata levies counted against your borrowing power. West Perth adds one of its own, because a good number of the buildings sit above commercial floors, and some lenders treat an apartment over offices or a gym as specialised security rather than an ordinary home.

The older houses near Kings Park come with a different trap. Many were converted to consulting rooms or small offices years ago, and a lender follows the zoning and the current use rather than the fact that the building still looks like a house. Something that reads as residential from the footpath can still be a commercial loan.

• Commercial loans for practices buying the suite or floor they already occupy
• Self-managed super fund lending on business premises, once your accountant has set the structure
• Home loans for apartments on Mount Street, Kings Park Road and Outram Street
• Refinancing when a commercial facility comes up for review or an interest-only period ends
• Development finance where an older West Perth site supports a larger building
• Expat home loans for owners posted overseas by a resources employer