What property can secure a private loan? Security types, asset by asset

Private lenders lend against real property, but not all real property is equal in a lender's eyes. The asset class, its location and how quickly it could be sold decide whether a funder is interested at all, how far it will lend against value, and how it prices the loan. This guide works through the security types our panel sees most, what each one needs, and what is excluded.

The question behind every security assessment

If the exit failed and the lender had to sell, how long would it take and what would it get? Everything below follows from that. Liquid, standard assets in deep markets support higher loan-to-value ratios and better pricing; specialised or remote assets support lower ratios, longer valuation timelines and fewer interested funders. The ceiling across the panel is around 75% gross on the strongest security; the bands below are relative to that, not promises.

Residential investment property

Houses, units and townhouses owned by an entity and not occupied by a director or their family. The most liquid security class and the one most funders are comfortable with, in capital cities and larger regional centres alike. Owner-occupied homes are excluded entirely: lending to an entity over a home the directors live in is the pattern the National Credit Code's anti-avoidance provision exists to catch.

Commercial: office, retail, mixed-use

Well-located commercial property with a tenant in place is strong security; the lease and the tenant's covenant matter almost as much as the building. Vacant commercial property is lendable but assessed on vacant-possession value with a longer selling period assumed. Mixed-use (shops below, residential above) is common in inner suburbs and is treated as commercial.

Industrial and warehouse

Industrial property in established estates near transport is in strong demand with panel lenders, often on terms close to residential investment. Purpose-built or oversized facilities in thin markets are assessed more cautiously because the pool of buyers is smaller.

Specialised assets: hospitality, childcare, medical, aged care

We lend against the freehold, not the going concern. A pub, a childcare centre or a medical suite is valued as real estate — usually on a vacant-possession or alternative-use basis as well as on its current use — and the loan-to-value ratio is set off the more conservative number. Licences, operator agreements and regulatory approvals attached to the business are not security. Expect fewer interested funders and a lower LVR than for a standard commercial unit, but these assets are regularly financed.

Development sites and vacant land

Land with a development approval is worth more and is easier to finance than raw land because the planning risk has been resolved. Lenders assess the zoning, the approval, the realistic exit (construction refinance, subdivision and lot sales, or on-sale of the approved site) and the holding costs. Loan-to-value ratios on land sit well below the panel ceiling, and englobo or rural-residential land further again. See construction finance for what happens once the build starts.

Rural and lifestyle property

Farms, rural-residential blocks and lifestyle acreage are lendable to entity borrowers, with the usual caveats: lower LVR, a smaller panel, longer valuation timelines and close attention to water, access and land use. A property within commuting distance of a regional centre is a very different proposition from a remote holding.

What is excluded

• —Owner-occupied homes, however they are held.
• —Property owned by an individual rather than an entity.
• —Leasehold interests that cannot support a registered mortgage (ACT Crown leases are an exception — they are mortgageable).
• —Business assets, plant, stock or goodwill as the primary security.
• —Property subject to enforcement, unresolved caveats or title defects the loan cannot clear.

How the valuation works

The lender instructs its own panel valuer; the borrower pays. For standard assets at modest LVR a short-form or desktop valuation may suffice; specialised and development assets need a full valuation, and construction facilities need as-is and as-if-complete figures. A recent valuation the borrower already holds is useful for indicative terms but is rarely relied on for formal offer. The valuation is the main timing variable in most private loans, so access to the property on day one matters.

Pulling it together

Tell us the asset, the location and whether it is tenanted, and we can usually say within a day which parts of the panel will be interested and roughly where the LVR will land. The FAQ covers the common eligibility questions; start an enquiry when you have a property in front of you.