How much money do you need to invest in commercial property?
The short version
- The cash you need is the deposit plus the buying costs. The deposit is set by the loan-to-value, indicatively 30 to 40 per cent of value on a let investment.
- On top of the deposit, budget for stamp duty land tax, legal fees, a valuation and survey, and often a lender arrangement fee.
- As a rough rule, allow 6 to 8 per cent of the price for costs on top of the deposit, though stamp duty rises with price and pushes this higher on larger deals.
- Borrowing is also capped by how well the rent covers the loan, the debt service cover, so the rent, not just the deposit, can decide how much you can buy.
- We size the whole sum with you before you offer, and we are an arranger, not a lender. Figures here are illustrative.
There is no single entry price for commercial property, but there is a clear way to work out the number for any given deal. It comes down to two buckets: the deposit the lender leaves you to find, and the transaction costs that sit on top. This article walks through both, with worked illustrative examples you can adapt.
We arrange the finance, so we model this calculation for clients every week. The aim here is to demystify it so you can sketch your own figure before you ever speak to a lender, and know roughly how much capital a purchase will tie up.
The deposit: the biggest single number
On a commercial investment, lenders typically advance around 60 to 70 per cent of value, so the deposit is the remaining 30 to 40 per cent. On a healthcare investment with a strong tenant and a long lease, you may reach the upper end of lender appetite, which lowers the deposit a little.
Use our affordability and DSCR calculator to see whether the rent supports the loan you have in mind. If it does not, the deposit is not your binding constraint, the rent is.
The costs on top of the deposit
The deposit is not the end of it. Several transaction costs land at or around completion, and they are real cash you need available.
| Cost | Roughly | Notes |
|---|---|---|
| Stamp duty land tax | Rises with price | Charged on commercial rates, banded; larger deals pay more |
| Legal fees | £1,500 to £5,000+ | Higher on complex leases and titles |
| Valuation and survey | £1,000 to £3,000+ | Lender requires a valuation; survey is prudent |
| Lender arrangement fee | ~1 to 2% of loan | Often added to the loan or paid up front |
| Broker fee | Varies | Agreed and disclosed before you commit |
As a working rule, allow roughly 6 to 8 per cent of the purchase price for these costs combined, knowing that stamp duty pushes the figure higher on larger purchases.
Worked example: a £500,000 surgery
This is the deal shape we see most often for a single primary care or dental investment. The exact stamp duty depends on the price banding at the time, so treat the figure as indicative.
Worked example: a £1,000,000 investment
Notice the costs rise faster than the price because stamp duty is banded. The bigger the deal, the more the transaction costs matter to your cash planning.
What this means for how much you can buy
Your buying power is the smaller of two limits: the deposit you can put down, and the rent that supports the loan. A keenly priced, low-yielding asset can hit the rent limit first, because there is less income to cover the debt.
Your deposit decides the door you can walk through. The rent decides how far in you can go.
We model both limits together so you do not fall in love with a building you cannot gear. See how price and rent interact in commercial property yields explained.
How we size it with you
Before you make an offer, bring us the price, the rent and the lease. We will model the deposit, the likely loan-to-value, the costs and the debt cover, and give you a single realistic cash figure to plan around.
Fix the price and LTV
We set a realistic loan-to-value for the tenant and lease, which fixes the deposit.
Add the costs
We estimate stamp duty, legals, valuation and fees so nothing surprises you at completion.
Test the rent
We check the rent covers the loan with margin, using a DSCR test.
Give you one number
We hand you a single cash-in figure and the terms behind it.
Start from the healthcare property investment hub, or ask us about clinic finance. If you already own a property and want to release capital, see healthcare property refinance.