Top Tips to Finance an Aged Care Facility in Sydney

If you are looking at buying an aged care facility in Sydney, the loan structure matters as much as the purchase price. Lenders treat these deals as a business and a property at the same time, so they want to see both stack up.

This article walks through how that works, what lenders tend to look at, and how to set yourself up before you make an offer.

How Do You Get a Commercial Loan to Buy an Aged Care Facility?

You apply for a commercial property loan, usually secured against the facility itself, and the lender assesses both the building and the business running inside it. Expect the application to be more detailed than a standard home loan.

Because the facility is both real estate and an operating business, lenders commonly look at the financial performance of the operation, the experience of the operator, and the value of the property. Our commercial loans team can talk through which lenders suit this type of purchase.

The trade-off is that specialist assets often come with tighter lending criteria. Some lenders will not fund them at all, and others may ask for a larger deposit or extra security depending on the deal.

What Do Lenders Look at With Aged Care Property?

Lenders generally focus on three things: the income the facility produces, the quality and experience of the operator, and the value of the property. How they weigh each one varies from lender to lender.

If you plan to run the facility yourself, expect questions about your background in aged care or health management. If you plan to lease it to an operator, the lease terms and the operator's track record become part of the assessment.

A commercial property valuation is also central. Valuers may treat the property as a going concern, which means the business income can influence the figure. A low valuation can reduce the amount a lender will advance, so you may need to cover the gap with extra funds.

Buying Through a Company or Trust: Does It Change the Loan?

Yes, the way you hold the asset can change how a lender assesses you. Commercial buyers may buy through a company or trust, and lenders may ask for different documents and personal guarantees.

A self-managed super fund (SMSF) is more restricted. Since 10 August 2026, a new SMSF borrowing arrangement for real property can only be used to buy business real property, meaning property used wholly and exclusively in a business, and the property must keep qualifying while the loan runs. Earlier arrangements and contracts exchanged before that date are grandfathered. Get specialist SMSF and legal advice first.

A lender may ask directors or trustees to guarantee the loan personally. That puts your own assets at risk if the facility struggles, which is a real cost to weigh up.

Structure also has tax and legal consequences. Speak to your accountant and a solicitor before you settle on one.

A Worked Example: Fixing the Gap Between Price and Valuation

Consider a Sydney buyer who agrees to purchase a small aged care facility and expects the lender to fund a set percentage of the price. The valuation comes back lower than the contract price, so the loan amount shrinks.

The buyer's broker speaks to a few lenders about the property and the operator's financials. One lender is more comfortable with the business income and values the going concern differently. The buyer also puts in a little extra equity from another property as additional security.

The outcome is that the deal proceeds with a loan amount that covers the purchase. The trade-off is that the buyer now has a second property tied to the loan, so a problem with repayments puts both assets at risk. This is an illustrative scenario only, and results depend on the lender and the deal.

Interest-Only or Principal and Interest: Which Suits an Aged Care Purchase?

Interest-only keeps repayments lower for a set period, while principal and interest reduces the debt from day one. Which suits you depends on cash flow in the early months of ownership.

As an illustration only, take a loan of $2,000,000 at an example rate of 6.75% p.a. Interest-only repayments would be about $11,250 a month ($2,000,000 x 6.75% / 12). Over a 25 year term on principal and interest at the same rate, repayments would be about $13,820 a month.

The lower interest-only figure helps if you are settling into a new operation. The cost is that you owe the same amount at the end of the interest-only period, and repayments then rise because the remaining term is shorter. You can test your own numbers with our interest only calculator or the mortgage repayment calculator.

Fixed or Variable: Choosing an Interest Rate Type

A variable interest rate moves with the lender's pricing, while a fixed interest rate stays the same for a set period. Commercial interest rates depend on your deposit, the lender and the strength of the deal.

Fixing gives certainty on repayments, which helps when you are budgeting around staff and care costs. The trade-off is that you may face break costs if you exit early, and you can miss out if rates fall. Variable loans can offer more flexibility, but repayments can rise.

Some borrowers split the loan so part is fixed and part is variable. That spreads the risk, though it also means you carry a bit of both downsides.

Refurbishing or Expanding: Do You Need Extra Finance?

If the facility needs upgrades or new beds, you may need extra funding on top of the purchase loan. Options include a construction facility with progressive drawdown, or construction loans for larger works.

With progressive drawdown, you draw funds in stages as work is completed, so you pay interest only on what you have used. The trade-off is that lenders usually want to see approved plans, a budget and a builder before they release money.

Equipment such as beds, lifts or kitchen gear can sometimes be funded separately through equipment finance. That can keep your property loan focused on the building.

Getting Your Paperwork and Timing Right Before You Offer

Get a lender's view before you sign a contract, because commercial deals often take longer to assess than residential ones. Early conversations help you avoid agreeing to terms you cannot fund.

Talk to your broker about financials, the operator's history and any licences or approvals that apply to the facility. Your solicitor and accountant should review the contract and the ownership structure. If you already hold other debt, a loan health check can show where you stand before a new lender looks at you.

Call one of our team or book an appointment at a time that works for you. We can approach lenders on our panel that consider aged care and help you build a loan structure that fits your plans for the facility.

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