How Much Deposit Do You Need to Buy a Commercial Warehouse in Australia?
Purchasing an industrial warehouse can be a significant step for a business owner or a commercial property investor. One of the first questions is how much cash you need to contribute before a lender will finance the balance.
Unlike a standard residential mortgage, commercial warehouse finance does not have one deposit requirement that applies to every borrower. The loan-to-value ratio, or LVR, depends on the property, borrower, purpose, lease profile and lender policy. The deposit is only one part of the funding calculation.
What Loan-to-Value Ratio Can You Get on a Warehouse?
LVR measures the loan against the lender's accepted property value. For illustration, a loan of $1.4 million against a $2 million property is a 70% LVR. That leaves a $600,000 equity contribution before purchasing costs. This is an example, not a quote or a promised lending limit.
Some lenders may consider lower or higher gearing depending on the security and application. A strong borrower buying a mainstream, well-located industrial property may be assessed differently from a newly established business buying a specialised building with limited alternative uses.
Illustrative Deposit Comparison on a $2 Million Warehouse
At 60% LVR: $1.2 million loan and $800,000 equity contribution, plus costs
At 65% LVR: $1.3 million loan and $700,000 equity contribution, plus costs
At 70% LVR: $1.4 million loan and $600,000 equity contribution, plus costs
At 75% LVR: $1.5 million loan and $500,000 equity contribution, plus costs
These figures show the mathematics of an LVR, not the available LVR for any specific lender or property. A valuation below the agreed purchase price can also increase the amount of cash required.
What Else Must Be Funded Beyond the Deposit?
The purchase budget may also need to cover transfer duty, legal and conveyancing costs, loan establishment costs, valuation fees, lender legal fees and any required property reports. Depending on the transaction, GST and adjustments at settlement can materially affect the cash needed.
Commercial property purchases can have different GST treatments, including potentially complex going-concern arrangements. Obtain legal and tax advice on the particular contract rather than assuming every warehouse purchase is handled in the same way.
Owner-Occupied Warehouse or Investment Warehouse?
If your own business will occupy the warehouse, lenders may focus heavily on business cash flow, financial statements, trading history and debt commitments. The case for purchasing rather than leasing should also consider working capital and the effect of tying equity up in the premises.
For a leased investment warehouse, lenders examine the asset, rent, lease expiry, tenant quality, vacancy exposure and the borrower's capacity to service debt. A strong lease is helpful, but rental income is not always accepted at 100% of its face value.
What Can Make a Commercial Warehouse Harder to Finance?
Highly specialised buildings with limited alternative tenant demand
Short remaining leases or current vacancies
Concentrated reliance on one tenant or one business income source
Property defects, contamination or unapproved uses
Weak cash flow, high existing debt or limited borrower contribution
Regional locations where a lender has a more conservative policy
Can You Use Equity in Another Property Instead of Cash?
In some cases lenders consider additional property security or a broader funding structure. This can reduce the immediate cash contribution, but it also exposes more assets to lender security and increases the complexity of the transaction. Borrowers should understand the consequences before cross-collateralising properties.
Documents to Prepare Before You Make an Offer
Purchase price, address, property type and intended use
Estimated available cash or equity and existing lending commitments
Business financial statements if the premises will be owner occupied
Lease, rent schedule and tenant information for an investment property
Contract, known building issues and any relevant valuation or reports
The proposed ownership entity and requested loan term
Frequently Asked Questions
Can I buy a warehouse with a 20% deposit?
That depends on the lender, property, borrowing structure and security. Do not assume residential property deposit rules apply to a commercial warehouse.
Does the bank use the purchase price or valuation?
Lenders apply their own valuation and credit policies. If the accepted security value is below the purchase price, you may need more funds.
Can a new business get an owner-occupied warehouse loan?
It may be possible, but the lender will need to assess the business plan, financial position, security and capacity to meet repayments.
Discuss Your Commercial Property Finance
Brampton Finance helps Australian business owners and investors compare commercial property finance from suitable lenders, considering loan structure, security, cash flow and the transaction's objectives. Loan approval and available terms are subject to assessment.
Explore our Commercial Loan services for more information.
Considering commercial property through super? See SMSF Loans.
For an initial enquiry, email info@bramptonfinance.com.au or call 02 9389 1077.
This article provides general information, not personalised credit, legal, tax or financial advice. Eligibility, interest rates, LVRs, fees and terms vary by lender and borrower circumstances. Consider the loan documents and seek independent professional advice where appropriate.
Comments