When Real Estate Is Part of the Deal: How Owning Your Building Can Add Value and Open New Financing Options
When Real Estate Is Part of the Deal: How Owning Your Building Can Add Value and Open New Financing Options
Key Takeaways:
Owning your real estate creates a second, separately measured asset. It behaves differently from your business's operating value.
A buyer purchasing a business that includes real estate may qualify for SBA 504 financing, a fixed-rate structure typically unavailable to a buyer taking over a leased location.
Selling isn't all-or-nothing. A leaseback or hold-and-lease structure can let you sell the business while keeping a financial connection to the property.
The right path depends on your goals: a clean exit, ongoing income, or flexibility to sell the property later.
Because real estate changes the buyer pool, financing, and tax treatment, it's worth mapping out the options with a broker before you commit to one.
When you own the building or land your business operates from, selling the business is really two decisions happening at once. The operating company and the real estate underneath it are typically valued through different methods and open up different financing paths, and how you handle the property can meaningfully change your total proceeds. Owners who lease their space don't have this decision to make; owners who hold the real estate do.
Does Owning Your Real Estate Change What Your Business Is Worth?
Owning your real estate typically adds a distinct, separately measured value to your total deal, one that sits alongside your business's operating value rather than inside it. An approximate business value range in the marketplace is usually built around a multiple of seller's discretionary earnings (SDE), which reflects owner salary and perks added back to cash flow. Real estate is a different asset, typically approximated through comparable sales or a current appraisal rather than an earnings multiple. A revenue multiple can offer a quick, rough sense of value, but on its own it doesn't provide much certainty.
Why Buyers and Lenders Look at the Real Estate Separately
Lenders financing an acquisition that includes real estate generally require the property's value to be established up front, before they'll approve financing for the deal. In our experience, sellers who understand this distinction have a much easier time interpreting an offer, because they can see which part of the price reflects the business and which reflects the property.
Not every seller needs a formal opinion of a business's approximate value before going to market, but for owners weighing whether to sell the real estate with the business, it's a useful early conversation to have. Transworld can help you better understand your business's value within the marketplace, including how owned real estate factors into the total picture.
What Financing Options Open Up When Real Estate Is Part of the Deal?
When real estate is included in a sale, a buyer may be able to use SBA 504 financing, a loan structure built specifically for owner-occupied commercial real estate that isn't available to someone taking over a leased location. That can widen the pool of buyers able to make a competitive offer.
The SBA 504 Two-loan Structure, Explained
Under current SBA 504 program guidelines, financing typically splits across three sources: a conventional lender covers roughly half of the project cost as a first mortgage, a Certified Development Company backed by the SBA covers roughly 40% as a second mortgage at a long-term fixed rate, and the buyer contributes the remaining amount, often around 10%, as a down payment. That fixed-rate portion can run 10, 20, or 25 years, giving a buyer predictable payments instead of exposure to future rate swings.
Because the real estate's value must be supported by a current third-party appraisal before approval, the property side of a deal usually needs its numbers locked in earlier than a lease-only transaction would. For deals with significant goodwill, a buyer will often pair the 504 loan with an SBA 7(a) loan or a seller note for the operating business and inventory. What we've seen work well is sellers and their brokers flagging this early, so a buyer's lender isn't scrambling to structure financing after an offer is already on the table.
See how buyer financing options could affect interest in your business. Contact a local Transworld business broker.
Should You Sell the Real Estate With the Business, Structure a Leaseback, or Hold and Lease to the Buyer?
There's no single right answer here. It depends on whether you want a clean exit, ongoing income from the property, or flexibility to handle the real estate on a different timeline than the business.
Selling the Real Estate With the Business
This is the most straightforward structure: one buyer, one closing, and a single transaction covering both the company and the property. It gives the buyer the clearest path to financing, including SBA 504 eligibility, and gives you a complete, clean exit, though you give up any future rental income or appreciation the property might generate.
Structuring a Leaseback
In a leaseback, the real estate is sold, often to a separate real estate investor rather than to the person buying your business, while the incoming owner signs a long-term lease to keep operating from the same location. This can convert an otherwise illiquid property into cash at closing, and it's worth exploring in particular when the real estate has strong standalone appeal to investors, separate from how the operating business is performing.
Holding the Real Estate and Becoming the Buyer's Landlord
Here, you sell only the operating business and keep ownership of the property, becoming landlord to the new owner. This can provide ongoing income and lets you benefit if the property appreciates, though it keeps you tied to the buyer's success as a tenant, and buyers sometimes need extra lender reassurance about a related-party lease.
Learn more about how owning real estate can shape your total deal value. Contact a local Transworld business broker.
How Transworld Approaches a Deal That Includes Real Estate
Because real estate and business value are established through different methods, a deal that includes property benefits from a team that can speak to both. Transworld has a dedicated commercial real estate division that works alongside our business brokers on transactions where real estate is part of the picture, so the property and the operating business are positioned together rather than as an afterthought.
Our brokers coordinate buyer meetings rather than fielding property and business questions separately with each party, which keeps the process moving and sensitive details confidential. With access to a database of more than 700,000 buyers, a business that includes real estate draws from a meaningfully larger pool of prospects, including buyers specifically looking for owner-occupied property as part of an acquisition.
Many Transworld brokers have owned and sold their own businesses, including ones with real estate attached, so the conversation about which structure fits your situation comes from firsthand experience. If you're weighing these options, a confidential conversation with a Transworld broker and our commercial real estate team is a reasonable next step before you decide how to position your property in the sale.
What Should You Weigh Before Deciding?
A few factors tend to matter most once you're past the initial choice between selling, leasing back, or holding the property.
Tax treatment. Not all proceeds are taxed as capital gains. Amounts allocated to a non-compete or to depreciation recapture can be treated as ordinary income, so review the proposed allocation with a CPA before you agree to it.
Seller financing. A seller note is a form of installment sale that may receive different tax treatment than a lump sum. Transworld doesn't endorse specific third-party installment sale programs, but a seller note is a common tool worth discussing with your advisor.
Standalone appeal of the property. A building with strong appeal to real estate investors on its own may be worth more sold separately than bundled into the business price.
Your appetite for staying involved. Holding the property and leasing to the buyer keeps you connected to the business long after you've sold it, which is worth weighing honestly against a clean break.
None of these factors point to one universal answer, which is why they're worth working through with your broker and tax advisor before you go to market.
Conclusion
Deciding what to do with real estate you own is one of the more consequential, and more overlooked, parts of selling a business. Whether you sell the property with the business, structure a leaseback, or hold it and lease to the buyer changes your proceeds, your tax exposure, and how connected you stay after closing.
With more than 45 years in business, over 15,000 completed transactions, and more than $1 billion in deal value, Transworld brings combined business brokerage and commercial real estate expertise to deals where property is part of the picture. Our brokers coordinate buyer meetings across a database of more than 700,000 potential buyers, help you gather the financial statements and documentation buyers will ask for well before they ask, and can suggest attorneys for critical closing documents, including the promissory note, non-compete, and closing statement. Fees typically range from 2% to 12% depending on transaction size, with flat-fee options for smaller businesses.
Understanding your options for the real estate side of your deal before you go to market can help protect your total proceeds and reduce surprises later on. If you own the building or land your business operates from and you're considering a sale, a confidential conversation with a Transworld broker is the right place to start.
Reach out to Transworld Business Advisors to schedule a confidential consultation and get expert guidance on positioning your business for sale.
Frequently Asked Questions
Do I need a separate appraisal for my real estate if I'm also selling my business?
In most cases, yes. Real estate is typically valued through comparable sales or a current appraisal rather than a business earnings multiple, and lenders, particularly for an SBA 504 loan, generally require that appraisal before finalizing financing.
What happens to my mortgage on the building when I sell?
If you sell the real estate as part of the deal, the mortgage is typically satisfied out of sale proceeds at closing. If you keep and lease the property instead, the mortgage remains your responsibility, and rental income should account for that payment.
Can I sell my real estate to a different buyer than the one buying my business?
Yes. In a leaseback structure, the real estate is sold separately, often to a real estate investor, while the incoming business owner signs a lease for the space.
Is a triple-net lease required if I keep the property and lease it to the buyer?
It isn't required, but it's common. A triple-net structure keeps the tenant responsible for property taxes, insurance, and operating expenses, similar to what the business already handled while it owned the space.
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