The short version
- The business and the building are two assets, valued in two different ways.
- You can sell both, sell the business and lease to the buyer, or sell the property separately.
- A rent below market looks like a perk but lowers what buyers will pay for the business.
- Many business buyers cannot afford to buy the building too.
Two Assets, Two Values
The business is valued on its earnings, usually as a multiple of cash flow. The building is valued like any investment property, on the rent it earns compared with what investors expect to make. The two numbers move for different reasons.
Interest rates, for example, move property values more than they move business multiples. The right time to sell one is not always the right time to sell the other.
Option One: Sell Both
A single buyer takes the company and the property. This gives you a clean exit, but it shrinks the pool of buyers, since the total price is much larger and lenders treat the two parts differently.
Option Two: Sell the Business and Be the Landlord
You sell the company and sign a lease with the new owner. You keep a steady rent check and the property's long term value. Buyers and their lenders will want a lease long enough to repay the loan, with renewal options.
Set the rent at market. A buyer will look past a friendly rate anyway, and a written lease at a fair rate makes the business easier to finance.
Option Three: Sell the Property Separately
Some owners sell the building to an investor, before or after the business sale, and the company leases it back. That turns the property into cash without waiting for a business buyer who can afford it.
Why the Current Rent Matters
If your company pays you little or no rent, its profit looks higher than a buyer will accept. The buyer resets rent to market, the earnings drop and so does the price. A company with no written lease, or one paying month to month, also worries lenders.
Our guide on recasting your profit and loss statement explains how rent is adjusted.
Get the Property Valued Too
Owners often guess wrong about what their property is worth, in either direction. A separate review by someone who values commercial property is worth the cost before you decide.
Where This Comes Up Most
Marinas, hotels, shops with yards and older family companies are the usual cases here. See finding a buyer for your marina or boat yard and finding a buyer for your hotel or motel.
The city business property return covers equipment, not the building; see the business property return. To talk through your options, request a sale estimate.