As we discussed in our blog ‘Why choose commercial real estate over other investment options?‘, commercial real estate provides an appealing alternative to residential property, shares or bonds, with long leases, secured annual rental increases and reliable tenants – all with the scope for capital growth.
Now that you’ve made a decision to invest, it’s time to turn your attention to financing. There are a number of banks, financial institutions and brokers that you can approach. However, the same criteria will be common to all:
- Credit history
Your lender will need to see what other financial obligations you currently hold and what assets you carry. You will need a clean credit history. The lender will look at your ability to keep up loan repayments. They will also want to ensure you’ve accumulated some assets. - Capacity
A lender will also look into your capacity to service your loan. It is largely measured by your cash flow and then measured against existing debts and the projected loan repayments. From these calculations, you will have clarity on the amount you can borrow and the finance package available to you. - You will require collateral
The lender will accept this as security for a loan. This could take the form of a number of resources, but it could mean you putting your house up as collateral if you’re a first time investor. Should you default on the loan payment, the lender can seize the collateral and resell it to recoup the losses. Obviously this is worst-case scenario, but all factors need to be considered during the application process. - Character
Once the key financial criteria are met, your character will also be a factor to be considered in the application process. Your financial background, proven track record and stability, will all form a major component in deciding the outcome. So be organised, prepared and have all your information at the ready. The more information you can provide to a lender, the more efficient and effortless the process will be.
With low interest rates, strong returns and low market volatility, getting into commercial property investing right now has many long term advantages and has never looked so attractive to first time investors.
Not sure where to start? To discuss your commercial investment strategy, talk to the experts at HKC Property Consultants. We’re happy to prepare a strategy for your next lease or help you find new premises to invest in. Call now 0404 398 663.
By: Hiona Kristiansson
Hiona Kristiansson has worked in the commercial property management industry for 20 years and has complete knowledge of the complex legislation governing commercial property leasing and management. Hiona's extensive experience in managing a range of asset classes includes CBD office buildings, industrial warehousing and retail tenancies. She is a Licensed Real Estate Agent and co-founded HKC Property Consultants in a bid to bring a superior level of service to commercial clients (private investors, corporate owners & tenants alike). Having worked both in a consultant role and directly for a major landlord, she has stood on either side of the fence, which gives her a broader perspective and helps achieve positive outcomes for her clients. Find out how Hiona can help you with your commercial or industrial property. Call now for a complementary 30 minute consultation.