A commercial strata purchase example can make the finance process far easier to understand than a generic borrowing limit. The figures below show how a self-employed buyer might purchase a tenanted strata office suite, what a lender may examine, and where the application can become more complex than a standard home loan.
The key point is that commercial finance is assessed property by property, borrower by borrower. A strong lease can help, but it does not automatically replace the need to show a workable deposit, acceptable income, and a clear reason the debt can be repaid.
The buyer and the property
Consider a company director purchasing a small strata office in Brisbane for $750,000. The suite is 110 square metres, includes two car spaces and sits within a professionally managed commercial building. It is leased to an allied-health business for $57,000 a year plus GST and outgoings, with three years remaining on the lease and a further three-year option.
The buyer runs a consulting business and plans to hold the office as an investment through a family trust. Their latest tax returns show taxable income that is lower than the business’s actual cash flow because of legitimate deductions, depreciation and one-off expenses. A major bank has indicated that the income is not strong enough under its standard policy.
This is not an unusual commercial lending scenario. The buyer may have a sound business, equity in other property and a reliable tenant, yet still need a lender that can take a more practical view of self-employed income.
Commercial strata purchase example: the numbers
In this example, the buyer has a $225,000 deposit, equal to 30 per cent of the purchase price. They seek a commercial loan of $525,000 at 70 per cent LVR. LVR means loan-to-value ratio: the loan amount divided by the lender’s assessed value of the security property.
The purchase price is not the buyer’s only cost. They must also allow for transfer duty, legal fees, valuation fees, loan establishment costs and any costs associated with the trust, company or SMSF structure being used. Depending on the state and the transaction structure, these costs can be substantial. The deposit should not be treated as the entire cash requirement.
If the valuation comes back at $730,000 rather than the $750,000 contract price, a lender applying a 70 per cent LVR may base the maximum loan on the lower valuation. In that case, 70 per cent of $730,000 is $511,000. The buyer would need to contribute an additional $14,000, as well as covering purchase costs, unless another acceptable security or a different loan structure is available.
That is why it is sensible to discuss a commercial purchase before a contract becomes unconditional. A valuation shortfall can affect even applicants with a healthy-looking deposit.
How rent supports the application
The annual rent of $57,000 is a positive feature, but the lender will not necessarily count every dollar at face value. It may reduce the rent to account for vacancy risk, management costs or the possibility that the tenant does not renew. The lender will also check whether the lease is genuine, current and assignable, and whether the tenant has a credible trading history.
For a short lease, a new tenant, or a specialised premises with a narrow pool of replacement tenants, the lender may take a more cautious approach. A generic office or well-located medical suite can be viewed differently from a highly specialised commercial space. It depends on the building, local demand, tenant quality and valuer commentary.
The buyer’s own income still matters. Where the rent does not fully cover proposed loan repayments and property costs, the borrower usually needs to demonstrate the shortfall can be comfortably met from business or personal income.
What the lender is likely to assess
A commercial lender assesses the security property and the people or entities behind the loan. For a company director or trust borrower, this often includes the directors or guarantors as well as the purchasing entity.
The lender will generally want to understand the property, the lease, the deposit source, the business income and the applicant’s credit position. It may request the contract of sale, lease, rental ledger, strata records, rates notices, financial statements, tax returns, BAS statements and business bank statements. Requirements differ between lenders and loan sizes.
For this buyer, the strongest supporting evidence may be recent BAS statements and six to twelve months of business bank statements showing stable revenue. An alternative-documentation commercial lender may be able to assess this evidence where full financials do not tell the complete story. This is not a shortcut around affordability. It is a different way of evidencing it.
Credit history will also be reviewed. A past default, tax debt, late repayment or discharged bankruptcy does not always end the conversation, but it needs to be disclosed early. Lenders will consider what occurred, when it was resolved, whether it appears on credit reporting, and how the applicant has managed obligations since. Trying to explain it after an application is submitted can create delays or lead to an avoidable decline.
Strata issues that can change the outcome
Commercial strata property has an extra layer of due diligence. The unit is only part of the security: the condition and governance of the building can influence valuation, tenant appeal and future saleability.
Review the strata report carefully. High levies, unresolved building defects, planned special levies, insurance concerns, disputes or substantial maintenance works can affect the buyer’s cash flow and a lender’s appetite. So can restrictions on signage, operating hours, permitted use, parking and access.
The permitted use must match the tenant’s business and the buyer’s plans. A medical operator, food business, gym and professional office can each have different approval, fit-out and compliance considerations. If a tenant is using the premises in a way that is not permitted under planning rules, the strata by-laws or lease, it may become a finance issue as well as a legal one.
Buyers should also look beyond the individual suite. Is the building well occupied? Are common areas maintained? Is access suitable for clients, deliveries or people with mobility needs? A lower price can be attractive, but it may reflect a weak building profile, high vacancy or a location with limited demand.
GST, going concern and the contract
GST treatment can materially change the cash needed at settlement. Commercial property may be sold with GST, without GST, or under the going concern provisions where conditions are met. The contract wording, lease status and buyer’s GST registration can all matter.
A buyer should obtain legal and accounting advice before relying on an assumed GST outcome. Finance approval does not replace that advice. If GST is payable at settlement and has not been budgeted for, the funding gap can be significant, even if it may later be recoverable through the buyer’s BAS.
It is also worth checking the finance clause dates. Commercial lenders may need time for valuation, credit assessment, entity checks and lease review. A rushed finance clause can put unnecessary pressure on a buyer whose circumstances need specialist assessment.
When the same deal needs a different structure
Not every buyer will have a 30 per cent deposit. Some may use equity from a residential property to strengthen the overall position. Others may purchase through an SMSF, which has its own rules, documentation and limited-recourse borrowing structure. An owner-occupier buying premises for their own trading business may be assessed differently from an investor relying on tenant rent.
Loan terms also vary. A lender may offer interest-only repayments for an initial period, principal and interest repayments, or a shorter loan term with a balloon payment. The right choice depends on cash flow, asset strategy and the ability to meet future refinancing requirements. Lower monthly repayments can assist working capital, but a balloon creates a debt that must be repaid or refinanced later.
For applicants with adverse credit, non-standard income or a recent change in business structure, the best first option may not be the cheapest advertised rate. A lender that can approve the transaction based on evidence it accepts may provide a practical path to purchase, with refinancing considered later if the borrower profile improves.
Preparing before you make an offer
A clear funding plan gives you more control at negotiation and settlement. Before signing, gather your identification, entity documents, deposit evidence, recent loan statements, business financials or BAS, bank statements, details of existing liabilities, and an explanation of any credit issues. Ask for the lease, strata information and outgoings early rather than waiting for the lender to request them.
Finance Me can assess the full position, identify lenders suited to the property and borrower profile, and manage the application through valuation, credit review and settlement. That can be particularly valuable where a mainstream lender has already said no, or where income needs to be supported with alternative documentation.
A commercial strata purchase is not just a question of whether the rent looks attractive. With the right due diligence, realistic cash contribution and a lender that understands your circumstances, it can become a property decision made with far more certainty.
