How Much Cash Do You Really Need to Buy a $2m Commercial Property?
Quick Answer
There is no single deposit required to buy a $2 million commercial property. Your cash requirement depends on the lender’s acceptable loan-to-value ratio, the property’s valuation, your financial position, the ownership structure and the transaction costs.
As a simple illustration, if a lender financed 65% of a $2 million property, the loan would be $1.3 million and the equity component would be $700,000. In Victoria, transfer duty on a $2 million dutiable value is currently $110,000, before legal, valuation, finance and other acquisition costs.
So a buyer using that structure could need at least around $810,000 of cash or available equity, before other costs and before considering GST.
That is very different from thinking: “I need a 20% deposit, so I need $400,000.”
The Real Problem
When someone asks how much cash they need to buy a $2 million commercial property, they are usually asking about the deposit.
That is only part of the answer.
For a commercial property buyer, there are at least four separate numbers to understand:
- The purchase price
- The lender’s loan
- Your required equity contribution
- The additional cash needed for acquisition and working-capital purposes
The fourth number is where buyers can get into trouble.
A business can technically have enough money to complete the purchase and still be undercapitalised immediately afterwards.
For an owner-occupier, that could mean buying the building and then discovering there is not enough cash left for fit-out, repairs, equipment, moving costs or working capital.
For an investor, it could mean having insufficient funds for capital expenditure, vacancy or unexpected building costs.
The objective is therefore not simply to raise enough money to settle.
It is to buy the property without putting the business under unnecessary financial pressure.
1. Start with the loan, not the deposit
Commercial lenders do not all use the same LVR.
LVR means loan-to-value ratio. In simple terms, it is the amount borrowed compared with the value of the property.
For example, a 65% LVR on a $2 million property means:
- Property value: $2,000,000
- Loan: $1,300,000
- Equity: $700,000
As an illustration, CommBank currently advertises a lease-document commercial investment loan with an LVR of up to 65%, subject to its eligibility and credit criteria. Other commercial lending arrangements can have different requirements depending on the property, borrower, security and loan structure.
So rather than asking:
“What deposit do I need?”
ask:
“How much will the lender actually lend against this property and my circumstances?”
That answer needs to be established before you become committed to the purchase.
What different LVRs look like on a $2 million property
| Illustrative LVR | Loan | Equity required |
| 50% | $1,000,000 | $1,000,000 |
| 60% | $1,200,000 | $800,000 |
| 65% | $1,300,000 | $700,000 |
| 70% | $1,400,000 | $600,000 |
| 75% | $1,500,000 | $500,000 |
These are illustrations, not lending promises.
The lender may also assess the property at a lower value than the purchase price. If you agree to pay $2 million but the lender values the property at $1.8 million, the lender may calculate its lending against the lower value.
At a 65% LVR, for example:
$1.8 million × 65% = $1.17 million.
That would leave a $830,000 equity requirement against the $2 million purchase price, before transaction costs.
That is why purchase price and lender valuation both matter.
2. Victorian transfer duty is a major part of the cash requirement
Buyers sometimes calculate the deposit and forget the duty.
For a $2 million dutiable value in Victoria, the current general land transfer duty rate is 5.5%, producing duty of $110,000. The Victorian premium duty rate applies to transactions over $2 million, at $110,000 plus 6.5% of the amount above $2 million.
That creates an important threshold.
At exactly $2 million:
Transfer duty = $110,000
At $2,100,000:
Transfer duty = $116,500
So the difference between a $2 million purchase and a price above $2 million has a direct impact on acquisition costs.
The actual duty position should always be confirmed for the particular transaction, ownership structure and contract.
3. So how much cash could you actually need?
Let’s use a straightforward example.
Assume:
- Purchase price: $2,000,000
- Lender LVR: 65%
- Loan: $1,300,000
- Equity: $700,000
- Victorian transfer duty: $110,000
That gives:
$700,000 equity + $110,000 duty = $810,000
And that is not the final cash requirement.
You still need to allow for items such as:
- legal and conveyancing costs
- valuation
- lender fees
- searches and due diligence
- building or environmental reports
- accounting and tax advice
- registration and settlement costs
- insurance
- immediate repairs or capital works
- fit-out
- moving costs
- working capital
The exact amount varies substantially from one transaction to another.
That is why a sensible acquisition budget should be built around total cash required, rather than simply the deposit.
4. What about GST?
This is one of the biggest variables in a commercial property purchase.
Commercial property transactions can have different GST treatments depending on the property and transaction.
For example, a qualifying sale of a going concern can be GST-free if the relevant conditions are satisfied. The ATO states that the purchaser generally needs to be registered or required to be registered for GST and the parties must agree in writing that the sale is of a going concern, among other requirements.
A taxable sale can have a different cash-flow outcome.
If a commercial property is sold with GST and you are a GST-registered business using the property in making taxable supplies, you may generally be able to claim the GST included in the purchase price as a credit. However, the timing of the cash flow still matters.
The margin scheme is another important distinction. The ATO states that a purchaser cannot claim a GST credit for GST included in a property purchased under the margin scheme.
So do not simply add 10% to every commercial property purchase and assume that is the final cost.
Instead, ask:
Is the transaction taxable, GST-free as a going concern, or being sold under the margin scheme?
Then have the GST treatment confirmed before signing.
For a $2 million property, a 10% GST component could represent $200,000 of cash-flow exposure if GST is applicable, although the ultimate economic cost may differ depending on the buyer’s GST position and the transaction structure.
That is a very large number to discover late.
5. The property may need more cash after you buy it
This is where the question becomes a business question.
Imagine an owner-occupier has $850,000 available.
They calculate:
- $700,000 equity
- $110,000 duty
- $40,000 for other acquisition costs
The purchase appears achievable.
But the building needs $150,000 of immediate works.
Now the business has a problem.
It may still be able to settle, but it has very little financial room left to operate.
Before buying, consider what the property is likely to require immediately and over the first few years.
That can include:
- roof works
- mechanical services
- electrical upgrades
- fire compliance
- accessibility works
- asbestos management or removal
- fit-out
- security
- drainage
- paving or hardstand
- office refurbishment
- equipment
- energy upgrades
This is why due diligence and finance planning cannot really be separated.
A property with a lower purchase price but substantial capital expenditure may require more cash than a more expensive property that is genuinely ready for occupation.
6. Don’t forget the business’s working capital
This is particularly important for owner-occupiers.
The cash used to buy the building is no longer available to fund the business.
If your business normally keeps $500,000 of working capital, it would be dangerous to treat all available cash above the deposit as spare money for the property.
Consider what happens after settlement.
Will you still have enough cash to fund:
- wages
- stock
- suppliers
- tax obligations
- equipment
- unexpected repairs
- seasonal fluctuations
- growth opportunities
- business contingencies?
The property should strengthen the business’s position over time, not create a working-capital squeeze from day one.
A commercial property can be affordable on paper and still be too expensive for the business.
7. What if you have other property or assets?
Your cash requirement does not necessarily have to come entirely from cash sitting in the bank.
Depending on the lender and transaction, the funding structure may involve other security or available equity.
Commercial lending can involve commercial property, residential property or other business assets as security, depending on the lender and loan structure.
That can change the amount of cash required upfront.
But there is an important distinction between having access to equity and having spare financial capacity.
Using another property as security may reduce the immediate cash contribution while increasing the overall risk to the business or owner.
That should be considered as part of the whole funding strategy, not simply treated as free money.
8. What should you have available before making an offer?
Ideally, you should know four numbers before you make a serious offer on a $2 million commercial property.
1. Maximum comfortable purchase price
Not the maximum the lender will approve.
The maximum price that still makes sense for the business.
2. Maximum loan
Based on the lender’s assessment, property type, valuation, servicing capacity and proposed structure.
3. Total acquisition cash
Including equity, duty, professional costs and other transaction expenses.
4. Cash you need to retain
This is the number buyers often miss.
It is the amount the business needs to keep available after settlement for working capital, capital expenditure and unexpected events.
The result is a much better question than:
“Can I buy a $2 million property?”
The better question is:
“Can I buy this property, complete the work it needs and still have enough financial capacity to run my business properly?”
Challenge the common assumption: the deposit is not the same as the cash requirement
A $2 million commercial property does not necessarily require $400,000 simply because someone has heard that a 20% deposit is enough.
Commercial property lending is different from a standard residential home loan.
Lenders assess the property, valuation, borrower, income, servicing capacity, security and transaction structure. Some commercial products may have materially lower LVRs. CommBank, for example, currently advertises up to 65% LVR on one lease-document commercial investment product, while other products and circumstances can differ.
And even once the lender has confirmed the loan, you still need to fund duty, professional costs and the business’s post-settlement requirements.
The right amount of cash is therefore not a universal percentage.
It is the amount required to complete the acquisition without compromising the business that is supposed to own or occupy the property.
FAQs
How much deposit do I need for a $2 million commercial property?
There is no universal commercial property deposit. The amount depends on the lender’s LVR, the property, the valuation and your financial circumstances. As an illustration, a 65% LVR would require $700,000 of equity on a $2 million property, before transaction costs.
How much is stamp duty on a $2 million commercial property in Victoria?
At a $2 million dutiable value, the current Victorian general land transfer duty is $110,000. The premium duty rate applies to transactions over $2 million, so the exact purchase price can materially affect the duty payable.
Does the bank finance the stamp duty?
You should not assume it does. Lenders assess the loan and security under their own policies, and acquisition costs such as duty and professional fees may need to be funded separately from your equity or other available funds.
Do I need to have the GST in cash when buying commercial property?
It depends on the GST treatment of the transaction and your circumstances. A taxable sale, a GST-free going-concern sale and a margin-scheme transaction can have different cash-flow and recovery consequences, so the GST position should be confirmed before signing.
Can I use equity in my home to buy a commercial property?
Potentially, depending on the lender, your available equity, servicing capacity and proposed structure. But using residential property as additional security increases the assets exposed to the commercial borrowing, so it should be assessed as part of the overall risk rather than simply viewed as a way to reduce the deposit.
How much cash should I keep after buying a commercial property?
There is no universal figure. An owner-occupier should consider the business’s working-capital requirements, upcoming capital expenditure and likely property costs before deciding how much cash can safely be committed to the purchase.
The bottom line
If you are buying a $2 million commercial property, don’t start with the question:
“What’s the deposit?”
Start with:
“What’s the total cash commitment?”
At a hypothetical 65% LVR, you could need $700,000 of equity. Add $110,000 of Victorian transfer duty at a $2 million dutiable value, then allow for legal, valuation, finance, due diligence and other acquisition costs. GST may create another significant cash-flow consideration depending on the transaction.
And after all of that, you still need enough cash left to run the business.
The property should fit the balance sheet, not just the purchase budget.
Property decisions are business decisions.
The right question is not whether you can somehow get a $2 million property across the line.
It is whether you can buy it and still have the financial capacity to operate, invest and respond to whatever comes next.
If you are considering a commercial property purchase in Victoria, Impacta can help you assess the acquisition from the broader business and commercial perspective, not just the purchase price.
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