Commercial Property Loan in Warana

Local Electrician Buys a Commercial Property in Warana

How Loanright Financial Services Helped a Local Electrician Buy a Commercial Property in Warana

Loanright Financial Services recently played a pivotal role in assisting a local electrician, who had long been renting a commercial property in Warana, on the Sunshine Coast, to finally make the leap into property ownership. This story highlights how a carefully brokered loan not only helped a small business owner take control of his business premises but also created a pathway to long-term financial stability and growth.

The Problem: Renting Instead of Owning

For years, the electrician had been leasing a commercial space in Warana, paying $65,000 in annual rent. This amounted to $5,000 each month. Though he was content with the location and the utility of the property, the cost of renting was becoming increasingly burdensome. He realised that despite the substantial sums he was paying each month, he had no asset to show for it.

The more he thought about it, the clearer it became: the rent payments were a sunk cost, and they weren’t contributing to his financial future. Like many business owners, he dreamed of owning his own commercial property but faced numerous obstacles in making that dream a reality. Commercial properties are more difficult to finance than residential ones, and lenders typically only provide loans for 65%-70% of the property’s value. This meant that, traditionally, borrowers had to come up with the remaining 30%-35%, which is often a steep hurdle for small business owners.

The Solution: Cross-Collateralisation

Enter Loanright Financial Services. Our team worked closely with the electrician to understand his financial situation, business growth potential, and goals for the future. We knew there had to be a way to get him out of the rental trap and into an ownership situation that was financially feasible.

After evaluating several lending options, we discovered a lender who was willing to consider cross-collateralisation. This strategy involves using the equity from the electrician’s family home as additional security for the loan on the commercial property. By leveraging this equity, we were able to unlock more favourable lending terms that made purchasing the property much more attainable.

Most commercial lenders will only lend 65%-70% of the value of a commercial property, leaving a significant gap for the buyer to fill. However, by using cross-collateralisation, we found a lender that was willing to extend the loan-to-value ratio (LVR) to 80% of the commercial property’s value. This left just 20% of the purchase price to come from the remaining equity in the family home, rather than requiring a hefty cash deposit upfront. This arrangement allowed the electrician to move forward with the property purchase without having to deplete his savings or halt the cash flow of the business.

Transforming Rent Into Investment

What was particularly compelling about this solution was how it immediately improved the electrician’s cash flow. Under his rental agreement, he had been paying $5,000 per month, or $65,000 per year, for the commercial space. By purchasing the property with the loan structured by Loanright Financial Services, his monthly repayments dropped to $4,200 per month—a savings of $800 per month compared to what he had been paying in rent.

This decrease in monthly outgoings gave him an immediate cash flow boost, allowing him to reinvest in his business. But the benefits went beyond monthly savings. Instead of making rent payments that offered no return on investment, he was now paying towards an asset he owned. Each repayment was building equity in the commercial property, which in turn increased his personal and business wealth.

Building Wealth Over Time

In the long term, this shift from renting to owning will significantly impact the electrician’s financial standing. Instead of simply covering his occupancy costs, he is now building an asset that will appreciate in value over time. Warana, located in the ever-growing Sunshine Coast region, is an area that has seen steady growth in property values. As demand for commercial properties increases, the value of his investment is likely to rise, providing him with a valuable asset that will continue to contribute to his wealth over the years.

Additionally, as the loan is paid down, the electrician’s equity in the property will increase, giving him more financial flexibility in the future. Whether he wants to refinance for better terms, expand his business into larger premises, or sell the property for a profit, he is now in a much stronger position to do so.

The Power of Tailored Financing Solutions

This story underscores the importance of finding the right financing solution for your unique circumstances. At Loanright Financial Services, we specialise in understanding the needs and goals of our clients and then tailoring our solutions accordingly. For this electrician, cross-collateralisation and finding a lender willing to extend the loan-to-value ratio on the commercial property were the keys to turning his dream of property ownership into reality.

By working with Loanright Financial Services, the electrician was able to transition from paying rent to building his wealth. The monthly savings in repayments, combined with the opportunity to build equity, gave his business a boost in cash flow and a solid foundation for long-term growth.

If you’re a business owner looking to purchase commercial property or explore better financing options, Loanright Financial Services is here to help you navigate the complexities of commercial lending and find the best solution for your financial goals.