Adding commercial property to an investment strategy can diversify a portfolio beyond residential, but the finance behind it runs on a different set of assumptions worth understanding before you start looking.

Lower LVRs are the norm, not the exception

Where a residential investment loan might go to 80-90% LVR, commercial property lending is generally more conservative — often in the 60-70% range, depending on the property type, tenant and lender. This means a larger deposit or more available equity is typically needed to get started.

Lease income drives serviceability

For a tenanted commercial property, lenders typically weigh the strength and term of the existing lease heavily — sometimes described by the lease's Weighted Average Lease Expiry (WALE) — alongside the tenant's covenant strength. A long lease to a strong tenant is generally viewed very differently to a short lease or a vacant property.

Loan terms and structure differ too

Commercial loans often run on shorter terms than a standard 30-year residential loan, sometimes with a balloon or refinance point, and GST treatment on commercial property purchases is a genuine consideration that sits alongside the finance question — one worth raising with your accountant before you're contractually committed.

Chris Brown

Chris Brown

Managing Director & Finance Broker at New Vision Financial Services, a credit representative under Australian Credit Licence 384704 and a member of the FBAA and AFCA. More about Chris →

General information only. This article is general in nature and doesn't take into account your personal financial situation, objectives or needs. It isn't tax, legal or financial advice. Lending criteria, product availability and policies vary between lenders and are subject to change — always confirm current detail with your broker before making decisions.

Frequently asked

Do commercial property loans require a bigger deposit?

Generally yes — commercial lending typically sits at lower LVRs than residential, often in the 60-70% range, meaning a proportionally larger deposit or equity contribution is usually needed.

What is WALE and why does it matter?

Weighted Average Lease Expiry measures the average remaining term across a property's leases, weighted by income. Lenders often view a longer WALE with a strong tenant as lower risk, which can affect both approval and loan terms.

Can I buy commercial property through an SMSF?

Yes, this is a common strategy, though it comes with its own rules and structure — see our article on SMSF property loans for how limited recourse borrowing arrangements generally work.