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Last updated: May 14, 2025
In the latest episode of the Property Nerds podcast, host Arjun Paliwal sits down with Chris, Head of Commercial at InvestorKit, and Jack from Fouracre Financial to discuss the evolving landscape of commercial property finance in Australia. This comprehensive episode provides valuable insights for investors looking to enter or expand in the commercial property market in 2025.
The Changing Commercial Finance Landscape
The commercial lending environment in Australia has undergone significant transformation in 2025. According to Jack from Fouracre Financial, “A lot of lenders are coming into the space… They’re also increasing their loan amounts and LVRs to try and attract more business and [offering] longer loan terms than we’ve seen previously.”
This shift has created more favorable conditions for investors, with banks like Bank of Queensland and Judo Bank making substantial moves into commercial lending. These institutions are offering competitive interest rates and higher loan-to-value ratios (LVRs) than were previously available in the market.
LVRs in Commercial Property Finance
One of the most significant developments in commercial property finance is the increase in available LVRs. While residential property investors might be accustomed to 80-90% LVRs, commercial lending has traditionally required much larger deposits. However, the experts note that 80% LVRs are becoming increasingly common in the commercial space.
Jack highlights: “Plenty of lenders are doing 80% LVR for commercial and even more so in the SMSF space.” This means on a $2 million purchase, investors may need approximately $400,000 for the deposit plus around $150,000 for costs – a total cash input of around $550,000, which is significantly lower than what might have been required in previous years.
Specialised Asset Lending Requirements
Not all commercial properties are treated equally by lenders. The podcast emphasises the importance of understanding different LVR requirements for specialised assets – properties with limited use cases.
Chris explains: “Specialised asset means just one use. So a childcare facility can only be used as a childcare facility if it comes vacant. You can only get a childcare operator leasing that place and that could take up to 6 to 9 to 12 months.”
This higher risk profile results in lower LVRs for specialised assets:
- Childcare facilities: Maximum 65% LVR (though most lenders offer around 50%)
- Car washes and other single-use properties: Similarly conservative LVRs
For investors, this means potentially needing double the deposit compared to standard commercial assets. On a $5 million specialised property, instead of requiring $1.25 million in cash input (at 80% LVR), you might need $2 million (at 65% LVR) – a difference of $750,000.
The Importance of Deal Packaging
An aspect of commercial finance that residential investors might find unfamiliar is “deal packaging” – the comprehensive presentation of property details to potential lenders.
Chris describes the process: “When we package a deal up in commercial, we get all the property details… the asset type, the location, the net return. We package up things like the lease as well. And we do a cashflow model for the banker… just so they can see what things look like.”
Jack emphasises how valuable this preparation is: “I can’t tell you how valuable that is for us… they’re back to us within an hour.” This contrasts sharply with poorly prepared applications where investors simply provide a property link without detailed documentation.
Common deal packaging mistakes include:
- Overstating rental income
- Not providing accurate net rent figures
- Failing to understand lease exclusions and inclusions
- Not allowing sufficient time for commercial valuations (which can take 5-10 business days)
SMSF Commercial Lending
Self-Managed Super Fund (SMSF) commercial lending has seen particularly favorable developments in 2025. Jack notes it’s “very common to see 80% LVR on a commercial property in SMSF” and highlights that 30-year loan terms are widely available.
Interestingly, there appear to be more lender options in the SMSF commercial space than outside of it, creating enhanced opportunities for investors using this structure. For those considering this path, Arjun recommends a minimum SMSF balance of approximately $550,000-$600,000 for a couple, which would allow around $400,000 for the property purchase while maintaining a buffer for offsets and diversification.
Communication and Timeframes
While residential property settlements typically range from 25-42 days, commercial transactions generally require 60-90 days. This extended timeframe reflects the more complex nature of commercial transactions, particularly regarding documentation and financing.
Chris emphasises: “I think it’s mainly around communication… getting the buyer to introduce the broker to your buyer’s agent. There’s a bit of fluidity there where the broker and the buyer’s agent can work on the deal together.”
Jack adds that understanding timeframes for valuations is crucial, and investors should “get ahead” of documentation requirements to avoid unnecessary delays.
Key Takeaways for Commercial Property Investors
- Higher LVRs are available: Up to 80% for standard commercial properties
- Specialised assets require larger deposits: Be prepared for 50-65% LVRs for single-use properties
- SMSF lending is increasingly favorable: With 80% LVRs and 30-year terms common
- Deal packaging is critical: Comprehensive presentation of property details accelerates financing
- Allow sufficient time: Commercial transactions typically require 60-90 days
- Recommended starting position: Approximately $550,000+ in cash/equity
Who Should Consider Commercial Property Investment?
According to Arjun, commercial property investment typically appeals to investors who have already built substantial residential portfolios and are now seeking income consolidation. The life cycle of investors working with InvestorKit has evolved to a point where many are ready to transition from growth-focused residential investments to income-generating commercial assets.
For those interested in exploring commercial investment opportunities, InvestorKit offers free consultations, generally recommending a minimum position of $550,000 in cash or accessible equity.
Conclusion
The commercial property finance landscape in Australia has evolved significantly in 2025, with more lenders entering the market, higher LVRs becoming available, and SMSF structures offering particularly favorable terms. However, successful commercial property investment still requires careful planning, comprehensive deal packaging, and awareness of the unique requirements for different asset types.
For investors who have built strong residential portfolios and are now seeking enhanced cash flow and diversification, commercial property presents compelling opportunities in the current market – provided they understand the financing nuances highlighted in this comprehensive guide.
Looking to explore commercial property investment? Contact InvestorKit for a free discovery call to discuss your specific situation and objectives.
This article is based on the Property Nerds podcast episode featuring Arjun Paliwal (CEO of InvestorKit), Chris (Head of Commercial at InvestorKit), and Jack from Fouracre Financial, recorded on May 14, 2025. Information is general in nature and should not be considered financial advice. Consult with qualified professionals before making investment decisions.