If your Western Sydney business is paying $60,000 a year in rent, you're not throwing that money away — but it isn't building anything you keep, either. Here's a plain-English look at the maths, and when it makes sense to think about buying the premises instead.
The equity point most owners miss
You already know rent is an expense. What's less obvious is how much principal your landlord is paying down each year using your cheque. On a typical commercial loan, after a few years a meaningful chunk of their monthly repayment is going to principal — straight into their equity, not interest. Every year you stay a tenant is another year of that compounding in their favour.
Buying your own premises doesn't make the money cheaper. It redirects it. The same monthly outgoing covers interest (deductible against rental income if you lease it to your own trading entity) and principal, which is now your balance going down.
Working the numbers on $60,000/yr rent
Let's take a Smithfield workshop or a Bankstown shopfront paying $60,000 a year in base rent. That's $5,000/month. Could that payment service a commercial loan at a 7.5% rate over 25 years?
Use the standard principal-and-interest formula:
Rearranged for the loan: L = P × [ ((1+r)n − 1) / r(1+r)n ]
P = $5,000 | r = 7.5% / 12 = 0.00625 | n = 25 × 12 = 300
(1 + 0.00625)300 ≈ 6.4834
L ≈ 5,000 × (6.4834 − 1) / (0.00625 × 6.4834)
L ≈ 5,000 × 135.32 ≈ $676,598
Rounded: around $676,000 of commercial loan. Add a 25% deposit of about $225,000 and you're looking at a purchase in the $900k range — not far off what a tidy strata industrial unit or compact Bankstown shopfront actually trades for.
None of this is a loan approval. Lenders assess your business financials, debts and the property. But if the rent you're paying today already services a six-figure commercial loan on paper, the conversation is worth having.
Where this is working in Western Sydney
We see this pattern most often with:
- Trades paying $4–7k/month for a workshop in Smithfield, Yennora or Girraween, who could buy a strata industrial unit in the same corridor.
- Retailers on Lakemba, Bankstown or Granville high streets paying strata rent that could service a loan on the shop next door.
- Allied health and professional services paying premium rent in Parramatta or Liverpool suites, with enough deposit to buy a comparable strata unit.
Deposit, LVR and what lenders check
Commercial loans don't use LMI the way residential does. The lender just sets a lower LVR — usually 70–80% for owner-occupier, 65–75% for investment. A larger deposit opens sharper rates and a wider lender pool.
On top of deposit, expect to show business tax returns and financial statements for the last two years (or go down a lease-doc / low-doc path if those aren't tidy), personal income evidence, a current lease on the property, and a property valuation. Settlement typically runs 6–10 weeks.
Should you buy, or stay renting?
Buying works when you plan to stay in the location for 7–10+ years, the deposit is available without starving the business, and the loan repayment comfortably fits inside what you'd otherwise pay in rent plus outgoings. Renting still wins when you expect the business footprint to change, when cash is better deployed back into the business, or when the property type is unusual enough to shrink your lender pool.
The rent-vs-buy calculator on our pillar page lets you plug in your own numbers and see the indicative loan, purchase price and LVR. That's the quickest way to tell which side of the line you're on. A broker conversation afterwards sanity-checks the lender fit.
Next steps
- Run the numbers using the rent-vs-buy calculator with your current rent + outgoings.
- Pull together two years of business financials and your current lease — most of the assessment hinges on these.
- If an SMSF structure is on the table, loop in your accountant and an SMSF specialist early. LRBA rules are strict and change the property that qualifies.
- Have a 20-minute broker conversation to confirm which lenders fit your deposit, structure and property type.
FAQ
Yes — a clean rental history shows the lender you've serviced this amount for years. It supports the case but doesn't replace standard assessment: the lender still reviews your business financials, debts, deposit and the property.
Most commercial lenders want 20–30% deposit (70–80% LVR). Owner-occupier structures can sometimes push toward 80%; investment commercial typically caps lower.
Often yes, through a Limited Recourse Borrowing Arrangement. The property must meet the ATO's "business real property" test and the SMSF must lease it to your business at market rent. High-level only — your accountant and a licensed SMSF specialist need to confirm.
Allow 6–10 weeks from application to settlement for a standard commercial deal. Having two years of business financials, your current lease and property details ready up front shortens the timeline.
This is general information only, not financial advice. Confirm your situation with a licensed credit adviser and accountant. Conditions apply. Mortgagefy is Credit Representative 532656 under Australian Credit Licence 348324.