Tips for Finding a Commercial Building Loan

There are a few things to consider when shopping for a commercial business loan. These loans are structured differently and there is usually a minimum loan amount. There are other differences as well that are not immediately obvious.

Having good credit is a very important part of securing a building loan in the first place; there is not much difference between each type of loan when it comes to having to have the credit in place. The difference is that when you are trying to secure a commercial building loan there may be several different credits that are being looked at. A residential building loan usually only depends on the future owners credit.

Credit Matters

Trying to secure a building loan for a commercial project will depend on a few factors. Typically the credit score of the business will be considered, this information is usually kept by Dunn and Bradstreet or Standard and Poor each of these entities rate credit worthiness of a business they use a special formula to determine the amount of risk that is involved with a business. Some of the key elements that they consider are on time payments to creditors, holdings and number of employees.

The bank or the financial institution takes the report from these companies into consideration; they also look at the officers of the corporation’s credit worthiness as well. The smaller the company the harder they look at the officers of the company.

Credit matters because the financial institution usually will have quite a large stake in a commercial project where they stand to lose a good bit of money if the company should go belly up.

The Benefits of Having a Flat Roof for Your Commercial Building

When building a new commercial office, many business owners focus intensely on the inside of the new commercial building, but tend to not think as much about the outside of their commercial building, including the roof. When it comes to determining what type of roof to install, either a flat or a slanted, individuals do not understand what these options are and which one is the best. Many contractors and roofing companies are telling individuals to select a flat roof for their commercial building. It not only reduces expenses but it can add value to the entire building.

Possibly the biggest benefit of having a flat roof is the accessibility it provides. When compared to other roofing options, flat roofs are more accessible because they do not have a large slope. There is a minimal chance that an individual will slip while on a flat roof as compared to a slanted or slopping roof. Some businesses like having a flat roof because it gives employees a place to go on their break when the weather is nice outside, especially if there is not a lot of land around the outside of the commercial building

Most people are unaware that even though the name of the roof is a “flat roof,” it is not 100 percent flat. Flat roofs have a very small, almost unnoticeable slope that assists in draining water off the roof that accumulates during a rain storm. This ensures that the roof does not leak and water does not start leaking into the commercial building.

Another added benefit is that is saves room space in the commercial building. With sloping roofs, a lot of times space is lost due to wooden beams holding up the roof which creates dead space. These areas cannot be utilized in any fashion. There is minimal dead space with a flat roof, increasing total space within the commercial building.

They are very easy to build. There is less surface area with a flat than with a slanting roof. If there is less surface area, then not as much raw material is needed to construct the roof. Because there are fewer raw materials needed, the business owner purchasing the flat roof for the commercial building does not have to pay as much money as they would with a slanting roof which requires additional raw material to construct. Flat roofs are also less physically demanding and take up less time to build. These two factors will also greatly reduce the price of building a flat roof on a commercial building.

Of course, the roof’s life expectancy is completely dependent upon how well the business owner maintains it. The business owner should have annual inspections done on the roof. This will not only assist in finding weak locations to fix immediately, but it will increase the overall longevity of the roof. The roof of the home should never be neglected. If a business owner notices something is wrong, like a leak, they should call in for maintenance immediately.

Domestic Rental Properties and the Australian Tax Office

Domestic rental property investments remain popular and continue to attract the attention of the Australian Taxation Office.

There tends to be some confusion about how rental property ownership can impact on your tax situation. With that in mind, here is a checklist of some common tax issues for you to consider (especially before you commit to buying a rental property).

If I own a rental property, am I in business? The answer to this question usually surprises people. If you simply own or co-own an investment property or even several properties, you are usually regarded by the Tax Office as an investor who is not carrying on a rental property business, either alone or with the other co-owners.

However, even if you are not carrying on a rental property business, this does not mean that you escape the tax net.

How can a rental property affect my tax?

– Acquisition and disposal costs generally are not immediately deductible (e.g., cost of purchasing the property, stamp duty on the transfer, conveyancing costs). Some of these costs may be relevant for capital gains purposes.

– When you rent out a property, the rent you collect and other rent related income (e.g., if you are entitled to retain rental bond money) is assessable for tax purposes. Against this income, you can claim deductions for a range of expenses you incur whilst this property is rented out (or available for rent).

– Where the total rental income exceeds the total allowable deductions, you will have a net assessable amount, which is added to your other taxable income. Where the total allowable deductions exceed the total rental income (this is a negatively geared property), you will generate a loss that may be off-set against your other taxable income.

– When you sell a rental property, you may need to pay capital gains tax on the net sale proceeds. You may also need to pay tax on gains made on the sale of any depreciated items that are sold with the property (e.g., where the property’s fixtures and fittings have been depreciated).

What happens if I own the property with someone else? If you own a property with someone else (co-ownership), your legal interest in the rental property determines your share of rental income and deductions.

The best place to look to work this out is the Title Deed to your property – this will usually identify what sort of legal interest you have:

– if you are a joint tenant, each of you holds an equal interest in the property (e.g., two joint tenants will each hold a 50% interest); or

– if you are a tenant in common, each of you may agree to hold unequal interests in the property (e.g., you may agree for one of you to hold a 70% interest and the other a 30% interest)

How does this type of ownership impact on my tax? If you are co-owners who are not carrying on a rental property business, you must divide the income and expenses for the rental property in line with your legal interests in the property:

– joint tenants always equally share income and expenses – you cannot vary this for tax purposes with some other agreement; or

– tenants in common share in the income and expenses in proportion to the their respective legal interests as set out in the Title Deed.

EXAMPLE John and Mary own a profitable rental property as joint tenants (a 50% interest each) and are not regarded as being in business.

Mary earns no other taxable income, so Mary and John decide it would be a good idea for Mary to receive most of the net income from the rental property and any profit on its eventual sale, so they enter into an agreement to that effect (e.g., Mary 70% and John 30%).

Because John and Mary are joint tenants, this agreement has no effect and Mary and John will still each receive 50% of the net rental income and the net proceeds on any sale of the property.

However, if John and Mary owned the property as tenants in common and the Title Deed indicates that Mary holds a 70% interest and John a 30% interest, then these proportions will usually be applied for tax purposes.

Do I have to pay PAYG on my rental income? Once you earn business or investment income (and this includes rental income), the ATO may notify you that you have to start paying your income tax in instalments (Pay As You Go (PAYG) instalments).

According to the ATO, as a general rule this installment system will apply to individuals who have shown gross business or investment income of $2,000 or more in your latest income tax return and the debt on your income tax assessment is more than $500.

PAYG instalments are usually made at the end of each quarter, but in some cases you may be able to pay an annual PAYG installment if the tax you would have paid on your business and investment income (excluding any capital gain) is less than $8,000, based on your last income tax assessment.