Understanding the different types of commercial properties is important, as they play a significant role in determining the financing options available to businesses. Commercial real estate has two primary categories: owner-occupied and investment properties. The main distinctions are where the repayments come from and who occupies the property. 

Owner-Occupied Commercial Properties 

Owner-occupied commercial properties are those where a business owner operates their own company out of the premises, and the business itself is the property's sole tenant or anchor tenant. In other words, the business owner owns and uses the real estate to run their operations. 

One crucial aspect of owner-occupied properties is that the mortgage repayment comes directly from the revenue generated by the business.  

These properties are commonly found in various sectors, including medical practices (doctors and dentists), manufacturing facilities, law firms, CPA firms, and other businesses that operate in single-use properties.  

Owner-occupied properties can be an excellent option if your SME client wants to expand, relocate from a leased space, or add more locations to their portfolio. By purchasing the property they operate from, they can build equity and give themselves more significant control over their business's future growth. 

Investment Commercial Properties 

On the other hand, commercial investment properties are different in terms of both repayment and occupancy. These properties are characterised by a third-party tenant occupying the facility. 

Commercial investment properties are popular for investors looking to generate rental income. The mortgage repayment does not depend on the business owner's operations or revenue. Instead, it comes from the rental income from the third-party tenant(s). This means that the rental income largely determines the property's financial viability, and the success of the leasing business owner's company has no direct bearing on the mortgage repayment. 

Investment commercial properties are often considered when business owners are interested in acquiring real estate to lease it to other businesses or entities. These properties can offer a steady stream of passive income and potential tax benefits through depreciation and deductions. 

Whether a business owner aims to purchase a property for their operations or investment purposes, aligning the right financing solution with their goals is important for long-term success.