BizBen.com
500 New & Refreshed Posts, Postings Daily
Over 8,000 Postings & 2,500 Resources
Assisting Buyers & Sellers Over 25 Years!

Categories

Should Real Estate Be Included In The Sale Of A Business?

Should a business opportunity offering include the real estate?

There are no right or wrong answers to the question about whether the seller of a business should include the real property, or sell the company only and continue on as the landlord/lady.

This question was posed to our panel of industry resources and we got a diverse range of suggestions and ideas, demonstrating that the solution to this puzzle depends on circumstances and requirements of the parties.



Following is the question that a BizBen Blog reader posed to our panel of resources, and the responses, edited for clarity, are listed below:

 
"I am thinking of selling my business but I also own the real estate where my business is located. Is it a good idea to sell the real estate with the business? Are more buyers looking to buy a business with the real estate? How will having real estate (or not) affect potential buyers seeking financing to buy my business? Some feedback on this issue would be nice since I am about to put my business up for sale and debating whether to include the real estate portion."

Here are responses from our California industry resources on this issue:

"Depending upon how you structure your financials, the business could be worth more money with the real estate.  S.B.A. looks favorably upon real estate tied to business acquisitions due to collateral.  Will certainly make it more appealing to the S.B.A."

Randall J. Barondess, Director, Troop Business Services, Westlake Village


"The value of the business and the value of the real estate are obviously handled separately. It is important to note that the business will need to show payments of fair market rent in the expenses for the business to the owner. If not this will need to be adjusted. I advise my clients to offer the real estate both for sale or for lease. I would determine a fair market value for both. Some buyers are interested in only leasing and not buying the real estate. When a buyer purchases the real estate, a lender will be more inclined to provide financing for the transaction. The business will of course still need to generate positive cash flow to substantiate the payments. If the buyer of the business decides to lease the real estate, then the seller can look to sell the property to an investor with that lease in place. Giving the buyer the choice will increase your odds in selling the business."

Matt Coletta, Managing Partner, Business Team, Woodland Hills


"Yes, yes and yes.  All things being equal, real estate attracts a far greater population of buyers.  Financing is also easier with real estate as part of the package.  When negotiating the ultimate deal, consider a short-term lease on the real estate to achieve the desired business price while giving the Seller some attractive tax advantages.  The commercial real estate market is down right now so the net effect is that the appraised value of the real estate is down. You can use this lease term to bridge this down market."

Patrick Marsch, First Choice Business Brokers, San Diego


"Its all depends upon business financials too. If his business is showing great cash flow and buyer is experienced and strong financially and credibility-wise, then he can be qualified for a business loan. Otherwise to get a business loan without real estate is like finding water on the moon!  Best idea is to sell with real estate and there are better chances of selling easily with 20-30% down. Even if the business is strong financial-wise, and showing good income, the buyer still has to come up with 50% down these days. No Bank is doing any loan with 35% down without secured real estate or property collateral !!"

I hope the seller knows his business's paper work well to make a decision now!

Taj  Randhawa, RE/MAX, FresnoCategories: BizBen Blog Contributor, Buying A Business, How To Buy A Business, How To Sell A Business

Contributor:

Peter Siegel, MBA
Areas Served: Nationwide - All Areas
Phone:  925-785-3118 Cell, 925-785-3118 Text
Peter Siegel, MBA - Founder Of BizBen.com (over 25 years), I am the Lead Advisor for the ProSell, ProBuy, & ProIntermediary Programs. I advise/coach buyers, sellers, and brokers daily about buying & selling small to mid-sized businesses throughout the Nation. I can be reached direct at 925-785-3118.




Place A Posting To Sell Or Buy A Business, Search All Postings


Sell A Business Fast: Place A For Sale Posting Now To Sell A Small Business - 7 Programs To Select From >
Find A Business To Buy Fast: Place A Wanted To Buy Posting Today - Best Way To Find & Buy A Business >
Search Business For Sale & Wanted To Buy Postings On BizBen - 500 New & Refreshed Postings Daily! >

Other Related Blog Posts, Articles, And Discussions You May Be Interested In

Sellers Discretionary Cash Add Backs Add Backs: Defining Sellers Discretionary Cash When Buying A Small Business

The use of add backs & sellers discretionary cash is common among sellers of businesses when showing their financial information & explaining that the buyer will actually enjoy more profit than is shown. But buyers are cautioned to review documents closely. Peter Siegel, MBA with BizBen explains.
Are Upfront Fees Worth It In Defense Of Upfront Broker Fees: Why Owners Should Pay Brokers Upfront

Are up front fees worth it? In this BizBen Blog post Brian Loring (Business Broker) discusses the pros and cons of owners of small businesses paying business brokers and agents an upfront fee for their services. There are many sides and opinions expressed on this topic by both sellers & brokers!
Why Many Deals Fail Why Many Deals Fail: Unrealistic High Asking Prices Are Usually The Culprit

The unfortunate truth is that approximately 50% of all small business sales transactions fall through. While failed transactions can happen for a variety of reasons, Peter Siegel, MBA (BizBen Founder & Lead Advisor) discusses the most common reason deals fall through; unrealistic asking prices.
Key Factors Play A Role When Selling When To Sell Your Small Business - Many Key Important Factors Play A Part

Determining the right time to sell a private business is as much an art as a science, because there are so many factors at play and each business is unique. The timing of a business sale is critical. Christina Lazuric, CBI, Orange County Business Broker discusses this topic on this BizBen Blog post.
How To Buy A Dry Cleaners Finding A Dry Cleaner Small Business For Sale That Will Be A High Performer

Before you buy a dry cleaners small business, read these critical tips about this industry. Discover why a dry cleaner needs to be "green" to be profitable. Peter Siegel, MBA (BizBen ProBuy, ProSell Program Advisor) explores this topic and other helpful strategies on buying a dry cleaning store.
3 Car Wash Types To Purchase Buying A Car Wash Business: 3 Successful Types Of Car Washes To Consider

One of the most popular business searches (and eventual business purchase) on BizBen is the self serve and full service car wash. Peter Siegel, MBA (ProBuy & ProSell Programs Director) with BizBen.com reflects on three types of car wash models and what buyers should look for in a car wash purchase.
Buying A Business Losing Money Should I Buy A Small Business That is Losing Money? Brokers & Agents Discuss

When considering buying a business that is losing money one has to be very careful. There are reasons that the business could be losing money that aren't fatal or extremely difficult to fix and there are other reasons that should send you running in the other direction. ProIntermediaries discuss.
Latest Business Broker Survey 6 Successful Traits Of Top California Business Brokers: New BizBen Survey

The latest BizBen.com survey of California Business Brokers and Agents outlined what it takes to be a top ten percent performer in the business brokerage industry. From good communication to utilizing your resources, these traits are something to take note of and put into practice to be successful.
Buying A Janitorial Service Janitorial Cleaning Services: 6 Considerations When Buying A Janitorial Firm

Buyers interested in buying a janitorial cleaning business will find companies in this industry for sale that are quite profitable. Careful due diligence, including the six factors covered in this blog post, is advised before completing a deal. Peter Siegel, MBA with BizBen explores this industry.
Keeping A Business Sale Confidential Why Is A Small Business Sale Kept Confidential? Advisors Discuss This Topic

Recently a business owner asked me on the phone, "Why do you keep the sale of a business confidential? How do you keep the sale confidential - any good tips?" Multiple Advisors weigh in on this subject. What would be your answer to this business owner? ProIntermediaries on BizBen discuss this topic.