Purchasing a Commercial Property
At MediPro Capital Finance, we can access commercial property loan solutions for your business and investment purposes. Should you be looking at opportunities to purchase a commercial office, suite or a medical practice premises, we have access to highly competitive commercial property financing solutions to ensure you can make the most of the opportunity. We could potentially help you utilise your SMSF to buy commercial property.
How MediPro Can Help You
Types of Commercial Properties
Commercial property includes office buildings, industrial property, medical centres, hotels, malls, retail stores, farm land, multifamily housing buildings, warehouses, and garages. In many states, residential property containing more than a certain number of units qualifies as commercial property for borrowing and tax purposes.
Commercial real estate is commonly known as:
Includes single‐tenant properties, small professional office buildings, CBD skyscrapers, and everything in between.
This category ranges from smaller properties, to larger office service or office warehouse properties to the very large “big box” industrial properties. An important, defining characteristic of industrial space is Clear Height. Clear height is the actual height, to the bottom of the steel girders in the interior of the building. This might be 14‐16 feet for smaller properties, and 40+ feet for larger properties. We also consider the type and number of docks that the property has. These can be Grade Level, where the parking lot and the warehouse floor are on the same level, to semi‐dock height at 24 inches, which is the height of a pickup truck or delivery truck, or a full‐dock at 48 inches which is semi‐truck height. Some buildings may even have a Rail Spur for train cars to load and unload.
This category includes sites on street frontages that may be single tenant retail buildings, small neighbourhood shopping centres, and larger centres and so on.
This category includes apartment complexes or high‐rise apartment buildings. Generally, anything with more than 4 dwellings is considered commercial real estate.
This can include investment properties on undeveloped, raw, rural land in the path of future development. Or, infill land with an urban area, sites, and more.
This can include any other non-residential properties such as hotel, hospitality, medical, and self‐storage developments, as well as many more.
What you need to know
Find out how much you can borrow and how much deposit you may need
It is always advised to discuss it with your accountant or financial planner first before embarking on this type of investment. Commercial Mortgages are always more complicated because the lenders view them as higher risk. Loan to Value Ratios can vary from 60% to 100% depending on your circumstances, so it’s imperative that you talk to your MediPro Specialist so we can give you an exact picture.
Get your approval in principle
By getting an approval in principle, before you sign any purchasing contracts, it allows the lenders to assess your financial position ahead of time. It will be valid for up to 3 months, so you have the confidence of knowing exactly how much you can borrow for when you go to auctions, or discussions with vendors or estate agents. This could be a powerful position if you’re in competition for a property where the other party may not be as well organised.
Understand how lenders assess your options
Lenders use a number of different things to determine if you qualify for a loan, and just how much you qualify for. Your MediPro Specialist have access to all the criteria and can help you understand all your options, and give you an opportunity to choose where you would like to place your mortgage, and who would suit your needs best.
Do not make rash decisions
Purchasing a property can often become stressful and confusing. Especially when in competition for a property you really want. This is when it’s easy to make costly mistakes. Your MediPro Specialist will be there to be the calming influence you need, so that rational and wise choices will be the order of the day.
Possible Tax Implications when Buying Commercial Premises
When you decide on commercial property as an investment strategy, it is important that you keep records right from the start. We can’t impress enough how important it is to have the involvement of your accountant or financial planner with a strategy like this. Commercial properties used in the running of a business are subject to taxes.
Taxes that you might need to be aware of are:
You’ll need records of the date and costs of obtaining the premises so that you can work out what the capital gain or loss is when you sell it.
Commercial Properties attract GST, unless it is purchased as a going concern.
If you purchase commercial premises to use in your GST-registered business, you can claim the GST included in the purchase price of the premises. You may also be able to claim GST on other expenses that relate to buying the property – for example the GST included in solicitors’ fees.
You cannot claim GST credits if any of the following apply:
- the seller used the margin scheme to work out the GST included in the price
- you are not registered or required to be registered for GST
For GST purposes, when you sell a business, you are selling a going concern if you sell to the purchaser all of the things that are necessary for the continued operation of the business and you carry on (or will carry on) the business until the day of the sale.
A sale of a going concern is GST-free if, in general, all of the following apply:
- the sale is for payment
- the purchaser is registered, or required to be registered, for GST
- the purchaser and seller have agreed in writing that the sale is of a going concern
Property that is part of a sale of a going concern can include any of the following:
- the business’ premises, when it is sold together with the assets and operating structure of the business
- a fully tenanted building, where the property and all leases, agreements and covenants are included in the sale
- the sale of a partially tenanted building, where
- the vacant part of the building is either being actively marketed for lease or undergoing repairs or refurbishment
- all leases, agreements and covenants are included in the sale
Possible Tax Deductions
If your property is used to run a business or is available to rent for that purpose, you can claim tax deductions for expenses associated with owning it, such as interest on a loan to buy the property and maintenance expenses.
You can claim a deduction for most expenses you incur in running your business as long as they are directly related to earning your assessable income.
You can generally claim operating expenses, such as office stationery and wages, in the year you incur them. However, you typically claim capital expenses, such as buildings, machinery and equipment, over a longer period of time.
You can only claim expenses that are directly related to earning your assessable income. If you make a purchase or use an asset for both business and private purposes, you can only claim a deduction for the business portion of the expense. If you use an item in your business for only part of a year, you may need to restrict your claim to the period it was used for the business.
You can’t claim a deduction for the goods and services tax (GST) component of a purchase if you can claim it as a GST credit on your business activity statement. You also can’t claim:
- private or domestic expenses, such as childcare fees or clothes for your family
- expenses relating to income that is not taxable, such as money you earn from a hobby
- expenses that are specifically non-deductible, such as entertainment and parking fines
Once again we insist that you must get the advice of your accountant or financial planner when choosing this investment strategy. This information is broad and general only, and may not apply to your particular circumstances.