What the valuer checks when your commercial property secures a private loan

When a shop, office, factory or warehouse is the security for a short-term loan, the valuation is the hinge the whole deal turns on. It sets how much can be borrowed, which structure fits and, sometimes, how quickly the loan can settle. Yet most owners only meet a valuer for twenty minutes and never see what they’re looking for.

This guide opens the folder. It explains what a commercial valuer checks for a private lender, why some things matter more on a short-term loan, and how to prepare so the figure on the report is the right one.

Who is the valuer working for?

We do — the lender. We instruct a valuer we trust, the report is addressed to us, and it’s written to support a lending decision. You’ll normally pay for it, but you won’t usually own it.

That matters because the valuer isn’t trying to find the highest possible number. They’re answering two questions for us: what would this property sell for in today’s market, and how easy would it be to sell? For a loan measured in months, not decades, the second question gets more weight than many owners expect.

It also explains why the council valuation on your rates notice doesn’t count. In Victoria, the Valuer-General revalues every rateable property each year with a 1 January valuation date, so councils can set rates. It’s a useful reference point, but it isn’t a market valuation addressed to a lender.

What does the valuer look at on the day?

Think of the inspection in five layers, from the street inwards.

Layer	What they check	Why we care
Location	Street, exposure, traffic, parking, neighbours, access for trucks	Drives demand and resale speed
Planning	Zoning, permitted use, permits, any overlays	Narrows or widens the pool of buyers
Building	Construction, age, condition, roof, services, compliance items	Repairs and risks come off value
Size and layout	Site area, floor area, office-to-warehouse split, clearance height	The basis for comparing sales
Income	Lease terms, rent, outgoings, vacancy	Investors price property on its income

Location and planning first. A building in the right zone, with good access and parking, sells faster. business.gov.au suggests checking zoning — “the rules that say if you can run your type of business in the area” — and any permits you need. A valuer is doing the same thing, but on behalf of every future buyer.

Then the building. They’ll measure or confirm floor areas, note the condition of the roof, floors and services, and look for obvious defects, unapproved additions or compliance issues such as fire services. On industrial sites, past uses that could leave contamination can be a significant factor.

Then the money. If the property is leased, the lease is often the single most important document.

How does a lease change the valuation?

For an investment property, a buyer is buying the income. So the valuer reads the lease closely:

• Who the tenant is and how established their business looks.
• How long is left on the lease, and whether there are options to renew.
• The current rent compared with market rent for similar space nearby.
• Rent reviews — fixed, market or index-linked.
• Outgoings — which costs the tenant pays and which the owner carries.
• Arrears or disputes — anything suggesting the income is less secure than it looks.

A long lease to a solid tenant at market rent usually supports value. A lease about to expire, rent well above market, or a tenant in arrears can drag it down. If you occupy the property yourself through your own business, the valuer may value it as vacant, as though an owner-occupier were buying it, or with a lease to your business — tell us which applies.

How do they arrive at a number?

Valuers usually use more than one method and check them against each other.

• Direct comparison. Recent sales of similar property nearby, adjusted for size, condition, location and lease.
• Income capitalisation. The net income is converted into a value using the returns investors are accepting on similar property in the current market.
• Summation (for some property types). Land value plus the depreciated cost of the improvements, often used as a cross-check on owner-occupied or unusual buildings.

Specialised buildings — a purpose-built childcare centre, a service station, a cold store — can be harder to value because there are fewer comparable sales and a smaller pool of buyers. Expect more conservative assumptions and, often, more questions.

If you’re checking your borrowing capacity before the valuation, our how much can I borrow tool and our guide to how equity is calculated help you test the numbers. Already confident the equity is there? Start your enquiry here — no credit check to begin.

Why does saleability matter so much on a short-term loan?

A bank lending over many years can afford to wait out a slow market. A short-term lender’s whole plan is built around a repayment date a few months away, so it wants comfort that, if the planned exit failed, the property could be sold in a reasonable time without a deep discount.

That’s why valuers often comment on the likely selling period and the depth of the buyer pool, not just the headline figure. A small strata office in a busy suburb with plenty of owner-occupier demand might sell quickly. A large, older factory on a quiet road with a single access point might take far longer, even if both carry a similar value on paper.

For you, the practical effect is that two properties of similar value can support different loan amounts. Properties with broad appeal — standard warehouse units, main-road shops, small offices — tend to be the easiest security for fast, short-term money. Unusual property can still work; it just needs more equity and a clear exit.

How can you prepare for the inspection?

You can’t control the market. You can control what the valuer sees and how quickly they see it. Have these ready:

1. The lease and any variations, plus a current rent and outgoings summary.
2. Floor plans or a survey, if you have them.
3. Permits and approvals for any extensions or changes of use.
4. A list of recent capital works — new roof, upgraded switchboard, new air-conditioning — with approximate dates and costs.
5. Strata details, if the property is part of a strata or owners corporation scheme.
6. Access arrangements — keys, alarm codes, tenant contact and notice.

Then, on the day: make sure every area is accessible, clear the obvious clutter, and be available by phone in case the valuer has a question. Don’t lobby for a number; do point out facts they might miss, like a recently replaced roof.

An illustrative example

Invented example, round numbers.

A Ballarat owner wants a short-term loan for $400,000 to fund new equipment and stock, secured on a freehold showroom she owns outright. Her own estimate of value is $1,500,000, based on a listing down the street.

The valuer inspects, reads the five-year lease to a car accessories retailer, notes the strong main-road exposure and an older roof, and compares three recent sales. The report comes in at $1,350,000. The loan of $400,000 is about 30% of that value, comfortably inside the equity. Because the property is in Victoria and unencumbered, she can choose between a short-term first mortgage and a caveat loan; with no existing lender on title, the first mortgage is the simpler fit.

Had the same showroom been in South Australia with a bank loan already in place, a short-term registered second mortgage would have done the job instead, usually arranged just as quickly.

What if the valuation is lower than you hoped?

Read the report summary with us, and focus on facts rather than opinion. A wrong floor area, a missed lease option or an outdated tenancy schedule can be corrected. A different view on the market usually can’t.

If the number stands, there are still practical paths:

• Borrow a little less, or stage the funding.
• Add security, such as a second mortgage over another property — or, for Victorian property, a caveat.
• Change the structure — for example, refinance the existing first mortgage rather than sitting behind it.

Our page on valuations for short-term loans covers residential property too, and our guide to commercial and industrial property as security explains how lenders view each type.

Put your property’s real value to work

A commercial property is often an owner’s biggest asset and the one most likely to unlock serious money quickly. A well-prepared valuation makes sure it’s counted properly. If you’re thinking about using your shop, office or warehouse as security, tell us about it and a real person will come back to you with what’s realistic.

The form is short — about 60 seconds — and there’s no credit check at the first-enquiry stage. Your information isn’t spread around a network of lenders — it stays with the lender you’re actually talking to. Please fill in the property type, its address and state, any existing loan and your deadline accurately, because those decide what the valuer gets asked to do.

See what your property could secure →