A recent article in Divestopedia discusses the topic of business real estate. The article, published December 2018, titled “Options For Business Real Estate When Selling A Company”. A key point of the article was if you understand your real estate options, you will have a better chance of achieving your goals wanted in a transaction. A lot of business owners do not know what real estate options are available to them when it comes time to sell the company.
There are two big options:
#1. Sell everything, including the real estate.
#2. Hold onto the real estate for the rental income.
The Divestopedia article points out that if you, as the business owner, personally owns the real estate in a separate entity, you should have a clear path to valuation. However, if the company owns the real estate, things could get more complicated.
If the company owns the real estate you will want to have a third party appraisal done. This appraisal will show an unbiased value. This article also points out that you should talk to your accountant if your business is a C-Corporation and your business also owns the real estate. There will be differences in taxation.
Every situation is different. Some buyers prefer to purchase the real estate along with the business. Other buyers prefer a lease because they don’t want everything that comes along with owning real estate. Communicating with the buyer regarding his or her preference is a smart move.
Divestopedia points out, if you do plan to retain the building, you will want to be certain that a strong lease is in place. You always want to have a strong lease.
The lease should leave nothing to chance. In the lease, spell out issues such as who repairs what and why. The article in Divestopedia points out another key reason for a strong lease. When it comes time to sell the property, you want to show you have a lease that is generating good income.
There are many variables that go into selling when real estate is involved. EBIT can help guide you through this complex topic.