A heavy industrial investment property loan is used to buy a heavy industrial property which can be either occupied by the owner or leased to others as a place of business and generate recurring income. This type of property is expansive and special purpose and may be of mixed-use, which means they are used for commercial and residential purposes. For instance, a building may have a retail storefront on the main floor such as a showroom or workshop, while the upper portion of the structure houses residential units.
Borrowing to invest in property may provide passive income, investment diversification, and capital gains. Investors often negative-gear (where the interest payable and cost required to hold the property exceeds the income generated) their investment property to benefit from certain tax deductions. Amongst other things, the amount generated in rental income together with income from other sources are important factors that lenders consider when deciding on whether to lend or not, their terms. Unlike residential property investments, lessees of heavy industrial properties may be required to pay for repairs and maintenance to the property, public liability insurance, and outgoings.
The loan is secured against the value of property being purchased and any other property offered as a top-up. There may be an opportunity to buy a property with a small deposit, usually between 10 to 20% of the purchase price. If the amount borrowed is more than 80% of the value of the property, lenders may require Lenders’ Mortgage Insurance or additional security which essentially protects them in case of default. This will be an additional cost to the borrower. This means, if the borrower defaults in their repayments and cannot repay the amount owing the lender may compel them to sell the property to settle the debt in full and call on any personal guarantees provided to support the loan.
The borrower will be required to pay interest at a fixed or variable rate or a mix of the two on the principal outstanding and any agreed upfront, ongoing and exit charges.
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