For many retiring business owners, the business and the real estate it occupies are deeply intertwined. You may have purchased the property years ago, built equity over time, and now rely on it as part of your long‑term retirement plan. So when it’s time to sell the business, a major question arises: Should I sell the real estate with it, or keep the property and lease it to the buyer?
There is no one‑size‑fits‑all answer. The right choice depends on your financial goals, tax considerations, the buyer’s needs, and the long‑term value of the property itself. Understanding the pros and cons of each option helps retiring owners make a decision that aligns with both their exit strategy and their future income needs.
Let’s break down the key factors.
1. Selling the Real Estate With the Business
Many buyers prefer to purchase the real estate along with the business because it gives them stability, control, and long‑term security. For sellers, including the property can simplify the transaction and increase the total deal value.
Advantages of Selling the Real Estate
Higher total sale price: Bundling the business and property often results in a larger overall transaction.
Cleaner exit: You walk away from both the business and the property at the same time.
Attractive to lenders: Real estate provides collateral, which can make financing easier for buyers.
No landlord responsibilities: You avoid ongoing maintenance, repairs, and tenant management.
Potential Drawbacks
Loss of long‑term rental income: Selling the property eliminates a potential passive income stream.
Tax implications: Real estate sales may trigger capital gains taxes or depreciation recapture.
Market timing: If the real estate market is soft, you may not get the best price.
Selling the real estate is often the right choice for owners who want a clean break and prefer a lump‑sum payout.
2. Keeping the Real Estate and Leasing It to the Buyer
Some retiring owners choose to keep the property and lease it to the new owner. This can be an excellent strategy for generating steady retirement income.
Advantages of Keeping the Real Estate
Reliable monthly income: A long‑term lease can provide predictable cash flow for years.
Tax benefits: Rental income may be taxed more favorably depending on your structure.
Asset appreciation: The property may continue to increase in value.
Flexibility: You can sell the property later, often at a higher price.
Potential Drawbacks
You remain a landlord: You’ll still be responsible for maintenance, repairs, and property management.
Buyer financing may be more complex: Some lenders prefer the business and real estate to be sold together.
Vacancy risk: If the buyer fails or relocates, you may be left with an empty building.
This option works well for owners who want ongoing income and are comfortable retaining some involvement.
3. What Buyers Prefer — and Why It Matters
Buyer preferences vary:
Owner‑operators often want to own the property.
Investors may prefer to lease.
SBA‑financed buyers frequently purchase both the business and real estate together because SBA loans favor this structure.
Understanding your likely buyer pool helps you anticipate which option will maximize value.
4. Tax Considerations You Shouldn’t Ignore
Real estate sales can trigger:
Capital gains tax
Depreciation recapture
State taxes
Potential 1031 exchange opportunities
Keeping the property may offer tax advantages, but selling may simplify your estate planning. Early consultation with your CPA and attorney is essential.
The Bottom Line
Whether you sell the real estate with the business or keep it as a rental property depends on your retirement goals, tax strategy, and appetite for ongoing involvement. Both options can be financially beneficial — the key is choosing the one that aligns with your long‑term vision. With the right guidance, you can structure the deal in a way that maximizes value, minimizes taxes, and supports the retirement lifestyle you’ve worked so hard to build.
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