Beginner's Guide to Buying a Medical Centre

Buying the building your practice operates from changes the way lenders assess your application.

When you purchase a medical centre as a self-employed GP, specialist, or allied health professional, you're applying for a commercial property loan secured against the premises. Lenders assess both your capacity to service the loan and the property's income-generating potential. The structure differs from residential lending because the asset itself is tied directly to your business operations, and most lenders want to see that the rental income or operational savings justify the purchase price.

How Lenders Assess Self-Employed Medical Professionals

Lenders look at your business financials, not just personal income. If you're purchasing a medical centre you currently lease, they'll assess your practice's profit and loss statements, tax returns, and cash flow to confirm you can meet repayments. Most lenders require two years of financials, though some will accept 12 months if your accountant provides a letter confirming consistent income. If you're buying a centre you don't currently occupy, they'll assess the lease agreements in place with existing tenants to confirm the property generates enough rental income to cover a significant portion of the loan.

Consider a GP who runs a solo practice and wants to purchase the building she currently rents for her clinic. Her practice shows a net profit of $180,000 annually after all expenses, including the current rent of $36,000 per year. The lender treats the loan repayment as a replacement for rent, so the question becomes whether her business can absorb the difference between her current rent and the new loan repayment. If she's borrowing $500,000 at a variable interest rate, her repayments might sit around $3,200 per month on a principal and interest loan. That's roughly $38,400 annually, only slightly more than her current rent, so the loan is serviceable within her existing cash flow.

Commercial LVR and Deposit Requirements

Most lenders will lend up to 70% of the property's valuation for owner-occupied medical premises. That means you'll need at least a 30% deposit, plus another 5% to cover stamp duty, legal fees, and a commercial property valuation. If you're buying a premises valued at $600,000, you'll need $180,000 as a deposit and another $30,000 to cover costs. Some lenders will go to 80% LVR if you're an established practitioner with strong financials, but that usually attracts a higher interest rate or requires lender's mortgage insurance, which is less common in commercial loans than it is in residential lending.

Strata Title vs Freehold Medical Premises

Strata title commercial properties are common in medical precincts where multiple practitioners share a building. You own your suite and a share of the common property, but you're also responsible for strata fees and subject to body corporate decisions. Freehold gives you full control of the land and building, but it also means you're responsible for all maintenance, insurance, and any future capital works. Lenders treat freehold and strata title properties slightly differently. Freehold is usually preferred because there's no strata risk, but a well-maintained strata title property in a medical precinct with established tenants is still a strong proposition.

In a scenario like this, imagine a physiotherapist buying a strata title suite in a health services building in Geelong. The suite is valued at $400,000, she's borrowing $280,000, and the strata fees are $3,200 per year. The lender will factor those strata fees into her serviceability calculation, so her total occupancy cost includes loan repayments, strata fees, and insurance. If her practice generates $150,000 in net profit and her total occupancy cost is around $24,000 annually, the loan is comfortably serviceable. The lender will also review the strata plan and building reports to confirm there are no outstanding issues or upcoming levies that could affect the property's value.

Interest Rates and Loan Structure

Commercial interest rates sit higher than residential rates, typically between 1% and 2% above the equivalent home loan rate. You can choose between a variable interest rate, which gives you the option to make extra repayments and access a redraw facility, or a fixed interest rate, which locks in your repayment for a set period, usually up to five years. Most self-employed buyers prefer variable loans because they allow flexibility to pay down the loan faster when cash flow is strong, and you can redraw if you need funds for equipment or fitout. Fixed rates provide certainty, but they come with restrictions on early repayment and no redraw.

Loan terms for commercial property finance are typically 15 to 25 years, though some lenders will extend to 30 years if you're owner-occupying the premises. Interest-only periods are available, usually for up to five years, which can help with cash flow in the early years of ownership. After the interest-only period ends, the loan reverts to principal and interest unless you renegotiate.

How the Application Process Works

The application process for a commercial property loan takes longer than a residential loan because the property itself requires more due diligence. The lender will order a commercial property valuation, which assesses the property's current market value and its income-generating potential. If you're buying a tenanted property, they'll review the lease agreements to confirm rental income. If you're owner-occupying, they'll assess your business financials to confirm serviceability.

You'll need to provide two years of business tax returns, profit and loss statements, a current balance sheet, and recent bank statements showing your business cash flow. If you're purchasing through a company or trust structure, the lender will also require company financials and details of any guarantors. The whole process usually takes four to six weeks from application to settlement, though it can be faster if your financials are well-prepared and the valuation comes back at or above the purchase price.

Why a Broker Matters for Commercial Property Finance

Commercial lending is not as standardised as residential lending. Different lenders have different appetites for medical premises, and some will only lend to GPs or specialists, while others are comfortable with allied health. A Finance & Mortgage Broker who works regularly with self-employed borrowers and commercial property can match your situation to the lender most likely to approve your application at the most appropriate rate. They'll also help you structure the loan in a way that fits your business, whether that means setting up a line of credit for future equipment purchases or arranging pre-settlement finance if you need to pay a deposit before your current property sells.

If you're self-employed and considering purchasing your medical centre, call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions