Sale-and-leaseback: freeing up capital from your commercial property

What is sale-and-leaseback?

Sale-and-leaseback means that you sell your commercial property and immediately lease it back from the buyer. You receive the full purchase price, continue working in the same property and pay rent from now on instead of interest and repayments. In practice, the lease agreement is signed simultaneously with the purchase agreement, so that not a single day of uncertainty arises.

When is it interesting?

• You want to invest in machinery, staff or an acquisition and the bank does not want to provide further financing.
• Your balance sheet is heavy with real estate while your core activity lies elsewhere.
• You are preparing a business transfer and want to separate real estate and the enterprise.
• You want to get rid of the owner's risk regarding maintenance and sustainability.

What does it yield?

The purchase price is based on the rent you will pay yourself. If you agree a market-compliant rent of €70,000 per year and the buyer calculates with an 8% initial yield, then the purchase price will be around €875,000. A higher rent means a higher purchase price, but also higher annual costs: therefore choose a rental level that your operations can structurally support, not the level that maximises the purchase price.

Record this in advance

Points for attention

In principle, the rent is a deductible business expense, while the book profit on the property can be subject to tax – always have the implications tested by your accountant. Also note that with a long-term lease agreement you give up flexibility: moving house becomes more expensive.

Read more about forms of capital at investors sought for real estate. Want to know what your property is worth? View selling investment property.