Everything You Need to Know About Buying a Commercial Strata Unit

What Makes Commercial Strata Finance Different

Commercial strata units are treated differently by lenders than residential property, and that difference shows up in deposit requirements, rates, and how your income gets assessed.

When you're buying a commercial strata unit, lenders typically want between 30% and 40% deposit, though some will lend at lower ratios if the property is owner-occupied and your business cashflow is strong. The LVR you're offered depends on whether you'll occupy the space or lease it out, the location and condition of the property, and the strength of any existing lease. Lenders also assess serviceability differently. If the property is tenanted, they'll include rental income but usually at a discounted rate to account for vacancy risk. If it's owner-occupied, they'll look at your business financial statements, often requiring two years of tax returns or BAS statements to confirm cashflow.

Consider a buyer in Kooyong looking at a small commercial office unit to run a consulting practice. The unit is listed within the Kooyong Village precinct, close to Glenferrie Road, where strata commercial spaces are popular with professional services. The buyer plans to occupy the premises and has strong business income over the past two years. A lender agrees to finance the purchase at 70% LVR, meaning a 30% deposit is required. The buyer also needs to budget for stamp duty, legal fees, and valuation costs, which on a commercial property can be higher than residential. Because the unit is owner-occupied and the business use is low-risk, the lender applies a slightly lower interest rate than they would for an investment property.

The structure of the loan also matters. Commercial property loans are typically offered on terms of one to five years, after which the loan reverts to a variable rate or requires refinancing. Some lenders offer longer terms, but shorter structures are more common in this space. Interest-only repayments are often available, particularly for investment properties where rental income is the primary source of serviceability.

Owner-Occupied vs Investment: How Lenders See It

Lenders draw a clear line between owner-occupied and investment commercial strata, and that line affects your rate, deposit, and how much you can borrow.

If you're buying the unit to run your own business from the premises, it's classed as owner-occupied. Lenders generally view this more favourably because you control the occupancy and there's no tenant risk. Rates are often lower, and you might be able to borrow at a slightly higher LVR. However, lenders will still assess your business income carefully. They'll want to see consistent cashflow, typically through two years of financials, and they'll apply a debt servicing ratio that accounts for business expenses and tax obligations.

If the unit is tenanted or you're purchasing it as an investment, lenders will assess rental income instead. Most lenders apply a shading factor of around 70% to 80% of the gross rent to account for vacancy periods, rates, and body corporate fees. They'll also look at the lease terms. A long lease with a quality tenant makes the deal more attractive. A short lease or a property currently vacant will be viewed as higher risk, and you'll likely face a lower LVR and higher rate.

In our experience, buyers in Kooyong who occupy their own commercial strata unit often find it easier to secure finance than those purchasing purely as an investment, particularly if the business has been operating for several years and shows steady income. The area's proximity to Hawthorn and the established professional services sector make it a strong location for owner-occupied commercial finance.

What Lenders Look for in a Commercial Strata Property

Not all commercial strata units are equal in the eyes of a lender, and understanding what they assess could change which property you target.

Lenders assess commercial strata based on location, zoning, the body corporate structure, and the quality of the building. A unit in a well-maintained complex with a healthy body corporate fund is far more attractive than a property with deferred maintenance or rising levies. Lenders will request a copy of the body corporate budget and minutes, and they'll flag any major upcoming works or disputes. They'll also check zoning to confirm the intended use is permitted. If you're buying a unit zoned for office use but plan to operate a retail business, the lender may decline the application or require a development approval.

The size and flexibility of the space also matter. Lenders are cautious about highly specialised fit-outs or layouts that limit future use. A standard office or warehouse shell is easier to finance than a property that's been heavily customised for a single business. The reasoning is simple: if you default or need to sell, a flexible space is easier to re-lease or resell.

As an example, a buyer looking at a commercial strata warehouse unit near the Kooyong Tennis Club might find that lenders are comfortable with the location and zoning, but if the unit has a narrow layout or limited access, the LVR could be capped lower than a more conventional space. Location within Kooyong is generally viewed positively by lenders due to the suburb's demographic and proximity to Toorak, South Yarra, and the wider Stonnington area, but property-specific factors still drive the final decision.

Structuring Your Loan and Planning for Settlement

How you structure the loan upfront affects your repayments, tax position, and flexibility down the track.

Most commercial loans are structured with a combination of principal-and-interest or interest-only repayments, depending on whether the property is owner-occupied or investment. Interest-only suits investors who want to maximise cashflow and claim interest as a deduction, while principal-and-interest suits owner-occupiers focused on paying down debt. You can also split the loan between fixed and variable, though fixed terms in commercial lending are typically shorter and less flexible than residential.

Settlement on a commercial property usually takes longer than residential. Expect 60 to 90 days from contract signing, and budget time for due diligence. The lender will order a valuation, which can take one to two weeks, and the valuer will inspect the property, review lease documents if applicable, and assess the condition of the building. If the valuation comes in below contract price, the lender will base the loan on the lower figure, meaning you'll need to cover the shortfall with additional equity or cash.

You'll also need to factor in GST. If the seller is registered for GST and the property is sold as a going concern with a lease in place, GST may not apply. If it's vacant or the seller isn't registered, you might need to pay GST on the purchase price and claim it back through your BAS. Your accountant and solicitor should confirm this before you exchange contracts.

For buyers in Kooyong, working with a broker who understands commercial property finance and has relationships with lenders active in the Stonnington area can make the process faster and reduce the risk of last-minute issues. We regularly see applications where buyers assume their business income will be sufficient, only to find the lender applies a stricter servicing calculation than expected. Getting your financials and structure sorted early avoids delays at settlement.

Call one of our team or book an appointment at a time that works for you. We'll walk through your business income, the property you're looking at, and how to structure the loan in a way that makes sense for where you're headed.

Frequently Asked Questions