Hi,
Over 6 months ago I rented what I believed to be a residential property from my real estate, which I absolutely love – it’s close to transport, very central, close to all amenities etc, and I’m very happy there. It was only when I contacted the council regarding a waste issue that I was informed that it was a commercial property (unbeknownst to me). I’ve since been contacted by the real estate who have informed me that a bank evaluation will be performed on the property tomorrow, and I’m concerned they are going to sell. If it was a residential property I would purchase it in a heartbeat. However, I have a 200k deposit and am still tempted to purchase it.
My questions are as follows:
1. Do commercial properties generally sell for less than residential properties?
2. Are loan rates, structure, ease of approval the same?
3. If I choose to convert it to a residential property at a later date, is this relatively straightforward? Or is it unlikely to be allowed? What are things that are considered in this instance?
4. Is this purchase a terrible idea?
I really like living there and see myself there for a few years at least. However, I obviously don’t want to make an impulse decision also.
Any insight is much appreciated.1. Do commercial properties generally sell for less than residential properties?
It can be higher, lower or the same – it comes down to the specifics of the property, location, availability of commercial within the area.
2. Are loan rates, structure, ease of approval the same?
NO. Generally normal residential lenders will not want to touch any property which is specifically zoned commercial. There are some lenders which can potentially look at it as residential, but it’s the exception than the rule. Commercial loans generally take longer to be approved + settle, have higher interest rates and larger deposit requirements.
3. If I choose to convert it to a residential property at a later date, is this relatively straightforward? Or is it unlikely to be allowed? What are things that are considered in this instance?
Dependent on the councils specific development plan. Best course of action is to speak with the council who will be able to let you know how easy/difficult it will be. If it’s within a commercial specific area it makes it far more unlikely to be altered other than remaining on a residential permitted use with a commercial title.
4. Is this purchase a terrible idea?
Depends! If you like the property and there’s potential to get it for a below market price due to the underlying ‘issues’ which will limit the buyer pool, it may very well be a good deal. Just go in with your eyes open with the purchase and ensure you price in the commercial zoning issue comparative to other residential property in the area.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Thanks for your advice Corey, will do :)!
Another thing to double check is council rates, on commercial property they can be 3 times those of residential for the same land/area.
This varies from region to region but power and water may be charged at different (higher) rates as well.
Being commercial, GST may apply which you as “Joe home buyer” cannot claim back………….really look into ALL that applies
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