When it comes time to sell your business, one important factor to consider is what to do with the property or real estate associated with it. Business owners who also own the building where they operate face unique options and benefits. This blog breaks down the key factors to consider when deciding whether to sell both your business and its real estate.
Transworld Business Advisors are all licensed real estate brokers as well as business brokers and we have a separate group of Transworld Commercial Real Estate experts on our team. This is very unusual in the business brokerage world. We do this so we can advise business owners who also own their real estate in an effective way. You don’t need to worry about handling the real estate yourself or finding another broker.
When listing a business for sale that includes real estate, we generally want to be as flexible as we possibly can to attract the largest group of potential buyers. This allows us to find the very best possible buyer for your business. Possible options we may consider for the real estate while engaging with buyers may be:
- Sell the business only, leaving the business owner as landlord.
- Sell the business and the real estate to the new buyer/operator.
- Sell the business, and enter into a long-term lease with that buyer. Then, we sell the real estate to a separate investor who does want to be the landlord. So both assets are sold in two separate transactions and Transworld can assist with both.
So how do you decide what’s best?
Again, generally you want to be flexible to not eliminate good buyers if possible. But in the end, you can decide to own the real estate or not on your terms.
Steps:
1. Assess Your Goals for the Sale
Do you plan to exit entirely, or would you prefer a partial exit while keeping some assets for long-term income? Selling both the business and property can provide a clean exit, often maximizing upfront cash flow. On the other hand, if you’re open to being a landlord, leasing the property to the buyer (perhaps with an option to buy later if desired) can provide ongoing income and allow you to maintain ownership of an asset.
2. Understanding the Value of Selling Both
When a buyer is interested in purchasing both a business and its associated property, it often increases the business’s overall appeal. The buyer gains security knowing they own the space, allowing them to avoid potential lease complications or rent increases. In many cases, owning the property can also streamline financing options for the buyer, as lenders may offer favorable terms for real estate-backed loans. As a seller, combining the two assets can result in a higher overall sale price, appealing to buyers who seek a complete ownership package.
4. Tax Considerations and Financial Implications
Selling both your business and real estate requires careful planning around taxes. Real estate and business sales are taxed differently and selling them together may have distinct implications. Consulting with a tax professional is essential to understanding these implications and minimizing your tax burden. In many cases, business owners elect to a 1031 exchange for like property to reduce taxes. Transworld brokers can refer experts to assist with these important decisions.
5. Flexibility in Buyer Negotiations
Owning both the business and its property allows for flexibility in negotiations, which can make your offer more attractive. For example, you might offer the buyer the option to lease initially with an agreement to buy the property later. Alternatively, you could sell the business but retain ownership of the building, generating rental income. Such flexibility can attract a wider range of buyers, including those who may be interested in the business but are not yet ready to purchase real estate. By offering options, you may increase buyer interest and streamline negotiations.
Final Thoughts
Owning both your business and its real estate opens opportunities to maximize value and customize the terms of your sale. Whether you choose to sell them as a package or keep them separate, having clear goals, market insights, and professional advice can help ensure the best outcome. At Transworld Business Advisors, we specialize in guiding business owners through these complex decisions. Reach out to us today to explore your options and make the most of your business and property assets.