Everything about industrial building investment: mortgages, call loan risks, tax treatment, and usage restrictions.
Complete GuideIndustrial buildings are classified as non-residential properties, with a maximum loan-to-value ratio typically around 50%. Some banks may be more conservative depending on the property's location, age, and usage. Interest rates are generally higher than residential mortgages, and loan terms may be shorter.
Banks may "call" (demand immediate repayment of) industrial property loans if property values drop significantly, if the property is found to be used for unauthorized purposes, or if the borrower's financial situation deteriorates. This risk is higher for industrial properties than residential ones.
Interest expenses on industrial property loans may be deductible against rental income for property tax purposes. If the property is used for business operations, interest may be deductible as a business expense. Consult a tax professional for specific advice on your situation.
Industrial buildings have specific permitted uses under their land lease and building regulations. Common restrictions include prohibitions on residential use, retail operations, or certain types of businesses. Unauthorized use can result in fines, enforcement action, and may trigger loan call-backs from banks.
Key factors include: location and accessibility, building age and condition, permitted uses, management fees, rental yield potential, and government policies on industrial building revitalization. Some older industrial areas may have redevelopment potential, but this comes with uncertainty.