Business Buy vs Business+Property Buy

November 18, 2024

by a searcher in Orlando, FL, USA

How good buying strategy can be used to buy a business with its property? Most recently I have encountered owner operators who are only interested of selling their businesses with properties. When I add the cost of property, the number is no longer working.

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Reply by a searcher
from Loughborough University in Shrewsbury, UK

Personally I would never recommend doing a deal that places you under undue pressure from the outset. If I am not comfortable with taking on the property from the outset (and I assume the valuation is fair) then I would propose a lease agreement with an option to buy within 'x' period for 'y' amount. As mentioned above, the lease payments positively (for you) adjust the EBITDA downwards, and it means you can take the property on if it makes sense once you have the business. If not, then you do effect the option. Naturally, your conversation with the Seller is that you intend on taking the property but at a point that it becomes commercially viable. I'm ironically having similar discussions now and the Seller is open to such a structure.

Reply by a searcher
from Northwestern University in Chicago, IL, USA

SBA won't have the same amortization for real estate vs. the business. In fact, its likely you'll end up using a 504 for the RE, I had a 20yr when I did mine. For the business (unless you have significant FF&E), you'll likely do 7a which is typically 7 years. Business owners like to sell the business separately and continue collecting rent on the property. Buyers like buying the property as it creates long term wealth and reduces the likelihood of a tenant/landlord dispute, which could present a potential risk to the business, especially if the real estate is a key component of the business.

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