Below-market rent doesn't help you
A buyer adjusts your company's profits to a fair market rent. If you've been charging yourself less, the business is worth less than you may think, and the building earns less than it could.
Business + real estate
Selling Your Business and the Building It Operates From
If you own the business and the building, you’re making two decisions at once: what to do with the company, and what to do with the property. Made together, they can change how much you keep and what income you have afterward.
Quick answer
John M. Salony is an M&A advisor and business broker who also handles commercial real estate. He helps owners who own both their business and its building decide whether to sell them together, sell the business and lease the building to the buyer, or sell the building separately, including through a sale-leaseback, and then handles both sides of the transaction. He also lists commercial property on its own.
- Former VP, Bank of America Merrill Lynch
- MBA, University of Maryland
- Accredited Business Intermediary (ABI)
- IBBA Member
Your options
What are your options for the business and the building?
Most owners choose one of four paths. Owning the building means you have two things to sell, and they affect each other, so the right choice depends on your goals, your buyer, and your taxes.
Each path is taxed differently. Your CPA should run the numbers before you decide, and I coordinate with them.
The lease
Why does the lease between your company and your building matter?
Because buyers and lenders look closely at the rent your company pays you and whether a written lease is in place. Both affect what the business is worth and whether a buyer can get financed.
The lease can decide whether your buyer gets a loan
If you keep the building, your buyer's lender will usually want a written lease, including renewal options, at least as long as the loan, often ten years.
The fix is simple and best done early: a written lease at a fair market rent, in place well before you sell.
Commercial property sales
Selling a commercial property on its own?
I list owner-occupied buildings, investment property, and land, whether or not a business sale is involved, and can co-broker in other states where applicable. Most sales take three to nine months.
- Owner-occupied buildings
- Industrial & warehouse
- Office & medical office
- Retail
- Mixed-use
- Investment property
- Land
What to have ready
- Current leases, including any lease with your own company
- Three years of income and expenses for the property
- Property tax bills and insurance records
- Your survey and title information
- Any environmental reports
- A list of major repairs and improvements, with dates
One advisor, both sides
Why use one advisor for the business and the building?
Because the decisions affect each other, and two advisors who each see half the deal can end up working against each other.
Most business brokers don’t sell real estate, and most commercial real estate brokers don’t value businesses. My background in investment banking, valuation, and acquisitions, together with commercial real estate brokerage, means one plan, one negotiation, and one closing.
Questions owners ask
What do owners ask about their business and building?
Should I sell my building with my business or keep it?
It depends on whether you want a clean exit or ongoing income, how specialized the building is, what your buyers can finance, and your taxes. Selling both is simpler. Keeping the building can provide income, but ties you to how the business does after you leave. We can compare the options with your numbers before you decide.
What is a sale-leaseback?
You sell the building to an investor, and your business signs a long-term lease to stay. It turns the equity in the building into cash without moving. It is different from keeping the building and leasing it to the person who buys your business.
Can a buyer finance both the business and the building?
Often, yes. SBA lenders can include the building in the same loan used to buy the business. Larger buyers usually finance the two separately.
How is commercial real estate valued?
Mostly by the income it produces. Buyers take the property's yearly income after expenses and divide it by a market rate of return, called a cap rate. For example, $80,000 a year at a 7% cap rate is worth about $1.14 million. Sales of similar properties are used as a check.
Do you handle 1031 exchanges?
I coordinate timing with your exchange intermediary and your CPA. Whether a 1031 exchange makes sense for you is a tax question for your CPA.
What does it cost?
Fees are set out in writing before we begin and paid at closing, with no upfront fees. When a sale includes both the business and the building, we agree on both at the start, so you know your total cost before anything goes to market. Business sale fees →
Confidential and no obligation
How do you start?
With a confidential conversation about your business, your building, and what you want afterward. We’ll compare the options before you decide what to sell, and when.
Confidential · NDA before you share financials · One advisor for the business and the building
