How to Finance a Warehouse Purchase

Warehouses are priced and financed differently to residential property.

Most lenders assess warehouse purchases on rental yield, lease terms, and the strength of your business balance sheet rather than your personal income alone. The loan structure you choose will determine how much working capital you retain after settlement, which matters when you're also fitting out the space or managing stock during the transition.

How Commercial Warehouse Loans Differ from Residential Finance

Commercial property finance typically requires a larger deposit and shorter loan terms than residential mortgages. Most lenders will lend up to 70% of the property's valuation, meaning you'll need at least 30% as a deposit plus settlement costs. The commercial property loan is assessed on the property's income-generating capacity, not just your ability to service the debt personally.

Consider a logistics business acquiring a 600-square-metre warehouse in Mornington. The property is leased to a national courier company on a five-year lease at $85,000 per annum plus outgoings. The lender values the property at $950,000 and offers 65% LVR, requiring a deposit of $332,500. The business directors also need to show that their company can service the loan from operating income, not just rental income from the tenant. The loan was structured as interest-only for three years to preserve cashflow while the business expanded its fleet, with principal and interest repayments commencing in year four.

Owner-Occupied Warehouses vs Investment Properties

If you're buying a warehouse to occupy for your own business, lenders treat it as owner-occupied commercial finance. You won't have rental income to offset the loan, so serviceability is assessed against your business trading history, profit and loss statements, and projected revenue. Lenders generally prefer to see at least two years of financials, though some will consider newer businesses with strong contracts or forward orders.

When the loan is for investment and the warehouse is fully leased to a third party, the lender will assess the quality of the tenant, the lease term remaining, and whether the rental income covers the proposed loan repayments. A warehouse tenanted by a government body or ASX-listed company on a long lease will typically attract better terms than a month-to-month arrangement with a startup.

Loan Structure and Repayment Flexibility

Most commercial property finance is written on a principal and interest basis over 15 to 25 years, though interest-only periods of up to five years are common. Some lenders also offer a revolving line of credit secured against the warehouse, which allows you to draw down and repay funds as needed without reapplying. This can be valuable if you're managing seasonal stock levels or planning staged fitouts.

Variable rates are more common than fixed in the commercial space, though you can fix portions of the loan for one to five years depending on the lender. Redraw facilities and offset accounts are less standard than in residential lending, so if you want flexibility to park surplus funds against the loan, confirm that upfront.

Valuation and LVR Considerations

Commercial property valuation is based on comparable sales, rental yield, and the condition and suitability of the building. A modern warehouse with high clearance, good truck access, and proximity to the Peninsula Link will generally value higher than an older asset with limited access or lower clearance. Lenders typically cap their exposure at 65% to 70% LVR, though some will go higher if the property is in a tightly held industrial precinct or leased to a strong tenant.

The valuation can also be affected by the lease structure. A property with a long lease to a quality tenant and regular rent reviews will be valued more favourably than a vacant warehouse or one with short-term tenancies. If you're buying vacant with the intention to occupy, expect a more conservative valuation and a lower LVR.

Settlement Costs and Upfront Expenses

Beyond the deposit, you'll need to budget for legal fees, stamp duty, valuation costs, and any loan establishment fees. Stamp duty on commercial property in Victoria is calculated on the full purchase price and can be significant. Legal costs are generally higher than residential conveyancing due to the complexity of commercial contracts and lease documentation.

Some lenders will capitalise certain costs into the loan if you have sufficient equity, but this reduces the LVR buffer and may affect your ability to secure the full amount you need. It's worth mapping out total cash requirements before you make an offer, particularly if you're also planning immediate improvements or fitouts.

How Mount Eliza's Location Affects Borrowing

Mount Eliza sits between Mornington and Frankston, with good access to the Peninsula Link and proximity to both bayside industrial precincts and the broader Frankston commercial corridor. Lenders view the area favourably due to its transport links and the mix of established businesses in the region. Warehouses close to major arterials or within recognised industrial zones tend to attract stronger interest from both tenants and financiers.

If you're a local business looking to purchase rather than lease, the combination of stable demand and limited new industrial stock in the area can work in your favour when presenting your case to a lender. Having an established business presence in the region also strengthens your application, particularly if you're moving from leased premises to owner-occupied.

When to Consider Specialist Commercial Lenders

The major banks dominate the commercial lending space, but specialist lenders and non-bank institutions can be more flexible on serviceability, loan structure, or LVR. If your business is growing quickly, you're self-employed with variable income, or the property doesn't fit a standard bank policy, a specialist lender may be worth exploring.

These lenders often have faster turnaround times and more tailored products, such as commercial bridging finance or progressive drawdown facilities for staged developments. Rates are typically higher than the majors, but the trade-off can be access to funding that wouldn't otherwise be available.

Call one of our team or book an appointment at a time that works for you. We work with a panel of lenders across the commercial space and can structure your warehouse purchase around your business needs, not just the property itself.

Frequently Asked Questions