Aged care facilities sit in a unique corner of commercial property finance. They generate income like a retail building, but lenders treat them more like a specialised healthcare asset, which changes how they assess risk and structure the loan.
Most aged care purchases involve either acquiring an existing operational facility or buying a property with an established operator as a tenant. The financing process differs significantly from a standard office or industrial purchase, and understanding those differences before you approach a lender will save you time and reshape how you structure the deal.
Lenders Assess the Operator, Not Just the Property
When you apply for finance to buy commercial property, the lender evaluates both the asset and the income it generates. With aged care facilities, the strength and reputation of the operator become a central part of the assessment. If you're acquiring a facility with an existing tenant, lenders will review the operator's financial stability, their track record in the sector, and the terms of the lease.
Consider a buyer looking at a 60-bed facility in outer Brisbane with a national operator on a 15-year lease. The lender will want to see the operator's financial statements, their occupancy rates across other facilities, and whether they have a history of meeting lease obligations. If the operator is strong and the lease is long, the lender views the income as secure and may offer terms closer to a standard commercial property loan. If the operator is new or the lease is short, expect a higher deposit requirement and more conservative lending terms.
Loan-to-Value Ratios Are Usually Lower
Most aged care facility purchases require a deposit between 30% and 40% of the purchase price. This is higher than what you'd typically see for an office building or warehouse, where a 20% to 30% deposit is more common.
The reason comes down to how lenders view the asset's liquidity. Aged care properties are purpose-built and harder to sell or repurpose if something goes wrong. Lenders protect themselves by keeping the loan-to-value ratio lower, which means you'll need more equity upfront.
If you're refinancing or using equity from another commercial asset to fund the deposit, make sure that equity is accessible and that the valuation on the existing property supports the amount you need. Lenders won't assume a commercial property valuation from two years ago still holds, so be prepared for a fresh assessment.
Interest Rates Reflect the Specialist Nature of the Asset
You won't find aged care facility finance at the same rate as a standard retail or industrial loan. Depending on the lender, expect rates to sit somewhere above the benchmark for general commercial property finance, often with a premium attached to reflect the perceived risk and specialist nature of the asset.
Some lenders don't touch aged care at all. Others will consider it only if the operator is well-established and the lease terms are solid. This narrows your options, which is why working with a broker who knows which lenders are active in this space makes a measurable difference to both the rate and the time it takes to settle.
Lease Terms and Occupancy Rates Drive Serviceability
Serviceability is where most aged care deals succeed or stall. Lenders calculate whether the rental income from the facility can cover the loan repayments, and they apply a buffer to account for interest rate changes. If the lease includes annual increases tied to CPI, that works in your favour. If the lease is flat or has no escalation clause, the lender will view it as less secure over time.
Occupancy rates also matter, even if you're not operating the facility yourself. A property with 90% occupancy and a strong operator will clear serviceability far more comfortably than one running at 70%. If the occupancy is below 80%, lenders may require a larger deposit or ask for additional security.
You'll Need a Stronger Financial Position Than You Think
Lenders expect buyers of aged care facilities to demonstrate a solid financial position, whether you're purchasing as an individual, through a self-managed super fund, or via a company structure. This means clean financials, a strong credit history, and often evidence of prior commercial property ownership or investment experience.
If you're new to commercial property, the lender may ask for a guarantor or additional security. If you're using a self-managed super fund, the loan will be limited recourse, which means the lender can only claim against the fund's assets if you default. That structure restricts the pool of lenders willing to participate, and those who do will typically require a higher deposit.
The Valuation Process Takes Longer
Valuing an aged care facility is not the same as valuing a warehouse. The valuer needs to assess the income stream, the operator's performance, the condition of the buildings, and the demand for aged care beds in that location. This process can take several weeks, and the outcome may differ from what you and the seller have agreed on.
If the valuation comes in below the purchase price, you'll need to make up the difference with a larger deposit or renegotiate the sale price. Lenders won't advance more than the approved loan-to-value ratio based on the valuation figure, so budget for this possibility during the due diligence phase.
Pre-Settlement Finance Can Bridge the Gap
Some buyers use pre-settlement finance to secure the property before their main loan settles, particularly if they're selling another asset or waiting on the release of funds from a super fund. This type of short-term funding carries a higher interest rate but can keep a deal alive when timing becomes an issue.
If you're planning to use this approach, make sure the terms of the bridging facility align with the settlement date of your long-term loan. Lenders offering pre-settlement or commercial bridging finance will still assess the underlying deal, so you won't bypass the usual due diligence or valuation requirements.
Some Lenders Prefer Freehold Over Leasehold Structures
If the aged care facility you're purchasing operates on leasehold land, some lenders will either decline the application or offer less favourable terms. Freehold properties are viewed as more secure because you own the land outright, which gives the lender stronger recourse if the loan defaults.
Leasehold aged care facilities do exist, particularly in areas where land is expensive or government-owned. If that's the structure you're working with, expect a smaller pool of lenders and potentially a higher deposit requirement.
Loan Structure Matters More Than You Think
Aged care facility loans are typically structured with principal and interest repayments over terms ranging from 10 to 25 years. Interest-only periods are less common than they are with other commercial assets, but some lenders will offer a short interest-only phase if the buyer can demonstrate strong serviceability and a clear plan for managing the asset.
If you're purchasing multiple facilities or planning to expand, ask about flexible loan terms that allow for top-ups or additional drawdowns without needing to refinance the entire loan. This can save you time and money if you identify another acquisition opportunity down the line.
Work With Someone Who Knows the Sector
Aged care facility finance is not something most brokers handle regularly. The lenders who participate in this space, the documentation they require, and the way they assess risk all differ from standard commercial deals. If your broker hasn't placed an aged care loan before, you'll spend time educating them while they educate the lender, and that slows everything down.
Loan Pantry works across the full range of commercial finance options, including acquisitions that sit outside the usual retail, office, and industrial categories. If you're considering an aged care purchase and want to understand your options before you commit, call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
What deposit do I need to purchase an aged care facility?
Most aged care facility purchases require a deposit between 30% and 40% of the purchase price. This is higher than standard commercial property because lenders view aged care assets as specialist properties with lower liquidity.
Do lenders assess the aged care operator when approving finance?
Yes, lenders will review the operator's financial stability, occupancy rates, and lease terms as part of the assessment. A strong operator with a long lease improves your chances of approval and may result in more favourable loan terms.
Can I use a self-managed super fund to buy an aged care facility?
You can use a self-managed super fund to purchase an aged care facility, but the loan will be limited recourse. This restricts the number of lenders willing to participate and typically requires a higher deposit.
How long does the valuation process take for an aged care property?
Valuing an aged care facility usually takes several weeks because the valuer must assess the income stream, operator performance, and demand for aged care beds in the area. If the valuation comes in below the purchase price, you'll need to adjust your deposit or renegotiate.
Are interest rates higher for aged care facility loans?
Interest rates for aged care facility loans are typically higher than standard commercial property loans due to the specialist nature of the asset. The rate will depend on the operator's strength, lease terms, and your financial position.
