Owner-Occupied vs Investment Commercial Property Loan

An owner-occupied commercial property loan is for a building your own business will operate from. An investment commercial property loan is for a building you will rent to someone else. Lenders treat the two differently: owner-occupied loans are judged mainly on your business’s earnings and usually allow a higher loan-to-value ratio (LVR), so the deposit is often smaller. Investment loans are judged mainly on the rent and the lease.

If you are weighing up buying your clinic, workshop, rooms or warehouse instead of leasing it, this guide lays the two loan types side by side, shows what your deposit actually has to cover, and walks through a worked example.

What is the difference between an owner-occupied and an investment commercial property loan?

The label tells the lender who is going to pay the bills. In an owner-occupied purchase, that is you: your business sits in the building and its profit services the loan. In an investment purchase, the money comes from a tenant, and your own business has little to do with it.

	Owner-occupied	Investment
Who uses the building	Your own business	A tenant who pays rent
What the lender leans on	Your business’s profit and cash flow	Rent, tenant quality, lease terms
Typical LVR ceiling	Generally higher	Generally lower
Deposit	Often smaller	Often larger
What can go wrong	Trade falls and the business cannot carry the repayments	The building sits vacant or the tenant leaves
What the lender wants to see	Financials, tax returns, trading history	Lease, tenant details, rental history, valuation
Exit if it goes wrong	Sell the building, often with the business stuck inside it	Re-let or sell the building

None of these are fixed rules. Banks and non-bank lenders set their own policy, and a strong business can sometimes beat the usual pattern. But the underlying logic holds across the market: the lender is asking where the repayments come from, and the answer changes the risk.

For the wider picture of how a lender builds a view of your business, see our guide to how lenders assess business loans. Our commercial property finance page covers the product itself.

How does a lender assess an owner-occupied purchase?

When you buy premises for your own use, you are effectively asking the business to do two jobs: trade, and pay for the building. The lender will want to know whether it can.

Expect them to look at:

• Profit before rent. If you currently pay rent, your accounts show that cost. After the purchase it disappears and is replaced by loan repayments, so lenders usually add rent back and test the new repayment against what is left. A business paying $8,000 a month in rent that will now pay $9,500 in repayments is a real change to cash flow, not just a swap.
• Trading history. Many lenders want to see a stable run of trading, commonly two years of financials for a standard application. If you have less, or your latest numbers are out of date, a low-doc option may be worth discussing.
• Other debts. Equipment finance, a line of credit, a vehicle loan and tax commitments all count against your capacity.
• Guarantees. If the buyer is a company or trust, directors or trustees are usually asked to guarantee the loan personally.
• The property itself. The lender’s own valuation, and how easily the building could be sold if it had to be.

Because the lender is leaning on you, not a tenant, the quality of your financial statements matters more than almost anything else.

How does a lender assess an investment purchase?

For a property you will rent out, the building pays for itself, at least on paper. The lender looks at:

• Rental income against the loan. Many lenders test whether the rent comfortably covers interest and costs, often using an interest coverage test. How much cover is needed varies by lender.
• The tenant. A national chain on a long lease is usually seen more favourably than a new business on a short one.
• The lease. Length, remaining term, review mechanism and who pays outgoings all matter. A building with a short lease left is harder to finance, which we cover in the context of tenanted property loans.
• Vacancy risk. What happens if the tenant leaves, and how long might the building sit empty.
• The borrower’s wider position. Other properties and debts still count.

Investors also face the question of what the property is. A standard office or warehouse in a well-tenanted area sits in a different category from a single-purpose building.

How much deposit do you need for each?

This is the question most people ask first, and the honest answer is that it depends on the lender, the property and you. What does hold fairly consistently is the direction: owner-occupiers are generally allowed to borrow a bigger share of the value than investors.

Broker and lender material commonly quotes owner-occupied ceilings in the 70% to 80% LVR range for standard commercial property, which implies a deposit of roughly 20% to 30% of value. Investment lending and specialised property are commonly quoted lower, which pushes the deposit up. These are indicative bands from lender and broker material, not rules, and policy changes. Ask for current policy before you plan around any figure.

Three things move the number for you:

1. Property type. A standard office, retail unit or warehouse is easier for a lender to value and resell. A medical suite, a car wash, a childcare centre or a building fitted out for one trade is harder, so lenders typically hold back more. Our industries pages show how different sectors are viewed.
2. Your financials. A business with strong, consistent profit can sometimes borrow at the top of a lender’s range. One with thin or patchy earnings usually cannot.
3. Security elsewhere. Offering additional property as security can sometimes lift the amount a lender will provide, though it also puts that property on the line. Our guide to secured vs unsecured business loans explains the trade-off.

Lenders also work in two different lanes. Banks are generally more conservative about LVR but may offer a longer-term structure. Non-bank lenders can be more flexible on documents and trading history. APRA’s published June 2026 statistics show commercial property exposures held by authorised deposit-taking institutions growing year on year, which is a reminder that the banks remain a major part of this market, not a closed door. The details of the table are on the APRA statistics page.

What does your deposit actually have to cover?

Here is where many buyers get caught. The deposit is the gap between the price and the loan, but it is rarely the whole of the cash you need.

• The valuation gap. LVR is calculated on the lender’s valuation, not what you agreed to pay. If you contract at $1.2M and the valuer says $1.1M, a 70% loan is worked out on $1.1M, and you fund the $100k difference as well as the deposit.
• Transfer costs. Most states charge duty when commercial property changes hands, and the rules differ by state. Victoria has been moving commercial and industrial property to an annual tax on land value, the Commercial and Industrial Property Tax, which the State Revenue Office describes as “progressively replacing” transfer duty. Whether duty applies to your purchase depends on the property and how it is treated, so check your own state revenue office before you assume anything.
• GST. Commercial property can attract GST, or be sold as a going concern with no GST, depending on how the sale is set up. Your solicitor and accountant need to confirm this before contracts are exchanged, because it changes the cash you need on settlement day.
• Legal, valuation and lender fees. These are modest next to the price, but they are due at about the same time as the deposit.
• Moving and fit-out. If you are leaving a leased space, remember the cost of the move, any make-good obligations on the old lease and anything you need to change in the new building.

Add these up before you decide how much to put in. If cash is tight at exchange, a short-term option such as caveat and bridging finance may bridge the gap, though it is a different product with its own costs and a different job.

Is buying your own premises the right move at all?

Business.gov.au’s funding guide puts the first question plainly: consider whether “it would suit your business better to buy or lease business premises”. That is the right order. Finance follows the decision; it should not make it.

Buying can make sense when:

• you plan to stay in the location for many years;
• the building is hard to replace, such as a fitted-out clinic or a workshop with specialised equipment;
• your rent is large enough that repayments plus costs are in the same range;
• you want a physical asset on the balance sheet, understanding it is also capital you cannot use in the business.

Leasing tends to suit better when:

• you expect the business to grow out of the space soon;
• cash is better spent on equipment, staff or stock;
• the business’s income is uneven, so a fixed repayment on a building is a risk;
• the building is not one you could easily sell.

One more point is easy to miss: a building ties up your capital in something that does not sell quickly. If your business later needs working capital, you may need a second-ranking loan or a refinance to release it, which is a further process with its own conditions.

A worked example: a physio practice buying its rooms

This is a made-up example. A physiotherapy practice in Adelaide has traded for six years and currently rents rooms. It is run through a company, with the two owners as directors. The rooms are for sale for $1.4M. The practice pays $7,500 a month in rent.

As an owner-occupied purchase:

• The lender looks at the practice’s profit with the current rent added back, then tests whether the business can cover the new repayments plus its other commitments.
• It may allow an LVR toward the higher end of its range, say 70% to 75%, for a standard office-style suite, which would mean a loan of around $980k to $1.05M.
• The deposit would be about $350k to $420k, plus costs.
• The directors are asked to guarantee the loan.

As an investment purchase (if the same practice bought the building in a separate trust and then paid rent to that trust at market rate):

• The lender may look at the rental income from the practice, treated as a tenant, alongside the practice’s own accounts. Because the tenant is a related party, many lenders look through to the practice anyway.
• The LVR ceiling could be somewhat lower and the lender may ask for a formal lease.
• The deposit could be larger as a result.

The point is not that one structure is better. It is that the assessment changes with the structure, and you should know which one you are presenting before you speak to a lender. The right setup for tax and asset protection is a call for your accountant and solicitor.

What should you do before you ask any lender?

Work through this sequence and the conversation gets a lot easier:

1. Decide the structure. Will the business buy, a related company, a trust, or the directors personally? Settle this with your accountant first.
2. Pull together the paperwork. Two years of financial statements and tax returns, recent BAS, a list of existing debts and the contract of sale. Our business loan documents checklist lists the standard set.
3. Add up the whole cash need. Deposit, valuation gap, duty or tax implications, GST, legal costs and moving costs.
4. Check the property type. If it is specialised, expect a lower LVR and more questions.
5. Understand the contract terms. Read what the lender wants you to sign. ASIC’s unfair contract term protections for small businesses apply to many small business loan contracts, and it is worth knowing what they cover.
6. Talk to someone who can see more than one lender. Policy on LVR and property type varies enough that one lender’s “no” is often another’s “yes, with conditions”.

If you want a hand with the last step, you can check your options here. It takes about 60 seconds.

How do banks and non-banks differ on this type of loan?

Both lend against commercial property, but their strengths differ:

	Banks	Non-bank lenders
Documents	Usually full financials and tax returns	Sometimes more flexible, including low-doc options
Trading history	Often prefer longer, steady history	May consider shorter history
LVR	Often more conservative on specialised property	Can be more flexible, depending on the deal
Speed	Can be slower	Often quicker
Structure	Often longer terms	Often shorter terms, sometimes with a plan to refinance

Neither is better in general. The sensible approach is to see which lane your particular purchase fits, and our lender comparison and how we compare pages explain how options are laid out side by side. Our repayment calculator is a quick way to see what a loan of a given size means for monthly cash flow.

Ready to see where you stand?

Buying the building you trade from is one of the bigger decisions a business owner makes, and it deserves a loan that fits how your business actually earns. If you would like to know which lenders might suit an owner-occupied purchase, and what your deposit and costs could look like, we can help you find out.

Enquiring takes about a minute, and there is no credit check to get matched, so asking does not put a mark on your credit file. We do not send your details to a pile of lenders: they go only to the lenders your business is referred to. A real person looks at your situation and calls you, and it helps a great deal if you fill in the form accurately, because that is how we match the right option the first time.

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