SELLING THE BUSINESS
REAL ESTATE OPTIONS
If the business contains or includes the real estate on the balance sheet, the seller is somewhat limited in terms of a sales strategy. To properly estimate a combined price for both the business and real property, the following steps should be followed:
- Appraise the real property separately.
- As part of the business valuation, charge the business with a market rent, as if the property is leased.
- Upon completion of the business value, add back the real estate value to get a total enterprise amount or value.
Assuming the real property is in a separate entity, apart from the business, and leased to the selling company, here are some additional considerations:
- The seller can keep the real property and lease it to the buyer. You will likely need a property manager for ongoing maintenance, ensuring long-term passive income.
- Sell the real estate separately, especially if the buyer does not want to buy it. This listing agreement is distinct from but related to the business sale.
- this option is viable for a strong real estate market
- if completed before the business sale, the company sale is less complicated.
- for tax mitigation purposes, you could consider a 1031 exchange into another property.
- If the current land lord is not the business owner, the seller should consider negotiating a long-term lease that is assumable and favorable to the new buyer.
- Use a lawyer(s) with corporate, real estate and M&A expertise. This will ensure you avoid the potential pitfalls.