Blog / Unlocking Equity: 5 Benefits of a Sale-leaseback for Buyers and Sellers

5 Benefits of a Sale Leaseback | Matthews™

Unlocking Equity: 5 Benefits of a Sale-leaseback for Buyers and Sellers

DATE November 6, 2018 / Author / Category Uncategorized / TAG


Are you an owner-operator looking for an alternative to traditional financing? Whether you’re looking to buy or sell, a sale leaseback has advantages you should know about.

WHAT IS A SALE-LEASEBACK?

A sale leaseback is a real estate transaction which allows an owner-operator to sell their real estate to a buyer then lease the property back from the buyer for a designated period. There are two parties to a commercial sale leaseback transaction who take on four different roles: the seller and buyer, who become, respectively, the operator and landlord.

Benefits for a Buyer: 

1. Brand New Lease 

As opposed to most properties on the market, a sale leaseback is a way of securing a new lease beginning the moment your transaction closes. This eliminates the confusion of any credits back to a buyer from a seller due to rental payments that were made when in escrow. It also allows for preferable financing, which can lower a buyer’s monthly debt service and increase their overall cash flow.

2. Customizable Lease Terms

If you have ever looked at a property and said to yourself “If only the rent was ‘X’ instead of ‘Y’ or “I would buy if it had two percent annual increases instead of 10 percent increases every 5 years” then a sale leaseback is the investment for you. The process allows a complete hands-on customization of the lease, which can give the buyer a sense of security knowing they are purchasing exactly what they want.

3. Invest in an Expanding Enterprise

Most, if not all, operators structure sale leasebacks as a financing tool. They look for financing that will expand their enterprise and increase their overall return from being a 10-unit operator to a 20-unit operator. Renovations are another cost that operators would rather not pay out of pocket. When an operator structures a sale leaseback with the intent of renovating current locations, it shows the buyer a commitment to the location, but can also boost yearly sales revenue.

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