Should I Sell My Building
With My Business? (2026)

The three choices

If you own the building your company operates from, usually through a separate LLC, the sale of the business forces a second decision. Austin Legal Group warns that “folding the property into a business multiple can undervalue it,” so the building deserves its own price and plan.

Why most buyers do not want your building

Real estate ties up capital that private equity firms would rather put into the next acquisition. SLB Capital Advisors, which arranges sale-leasebacks for sponsors, puts it bluntly: “We believe there are very few reasons for OPCO private equity investors to own real estate.” The accounting firm UHY agrees that “most buyers prefer not to invest in real property.”

So the building often ends up with a net lease investor. SLB Capital Advisors counted 714 U.S. sale-leaseback transactions in 2025, with dollar volume up 18% to about $14.4 billion. When Destination Pet bought Barkefellers’ four Indianapolis pet resorts in June 2026, BCLP reports that “Reliant Net Lease, a Kansas City-based REIT, acquired the underlying real estate and entered into long-term leases with Destination Pet.” A strategic buyer that wants a permanent site may buy the building; one consolidating locations may want a short lease or none.

The rent sets two prices

Rent is where the business sale and the building meet. In a quality of earnings review, the buyer’s accountants reset any rent you charge yourself to market. Blue & Co. lists rent among related-party costs “that again may be too high, low, or not expected to be incurred,” and BDEmerson gives the example of “rent paid to a related party at half the market rate (adjustment down).” If you have been charging yourself too little, adjusted EBITDA falls, and so does the price. Our guide to EBITDA add-backs covers how buyers test these adjustments.

The same rent then sets the building’s value, because investors price a leased building by dividing rent by a capitalization rate. A worked example shows how the two move in opposite directions.

On paper, every dollar of rent moves value from a business priced at 6 times earnings to a building priced at nearly 14 times rent. SLB Capital Advisors notes that sale-leaseback cap rates “commonly imply multiples of 12x – 16x,” a gap sponsors use to help fund acquisitions. It is also why a buyer will hold you to market rent: the business side is the part it is paying for. AEGIS Law warns against the opposite mistake: if you agree to below-market rent to help the deal, “treat it as a price reduction, because it is one.”

What the building is worth in 2026

Cap rates have risen with interest rates, which lowers what a given rent is worth. The Boulder Group’s Q3 2026 net lease report put the overall asking cap rate at 6.92%, “the highest level reached in over a decade,” with retail at 6.69%, industrial at 7.28%, and office at 8.00%. Lease length and tenant strength lower your cap rate and raise your price. In Boulder’s data, auto service properties with 16 to 20 years of lease remaining were listed at a median asking cap rate of 5.90%, against 7.45% with five years or less.

Essential Properties Realty Trust invested $1.3 billion in 2025 at a 7.9% weighted average cash cap rate. Its 2025 investments were 95% sale-leasebacks with an average lease term of 18.8 years and annual rent increases averaging 2.2%. Northmarq cites a market standard of “at least 3x for Rent to EBITDAR coverage,” meaning earnings before rent should be at least three times the rent.

If you keep it, you become the landlord

Keeping the building keeps the rent, the appreciation, and the chance to pass the property to your heirs. But your tenant is now a company you no longer control, often newly leveraged. AEGIS notes that the tenant “will often be the buyer’s new operating entity, which may have little besides the business you sold it,” and that “if the buyer struggles, your rent and the value of your building both suffer.” A buyer that will not commit to a lease, or a roll-up that later consolidates locations, can leave you exposed; Brouse McDowell cautions that owners without a strong lease “may be left with an empty building.” And if the tenant files for bankruptcy and rejects the lease, federal law caps your claim for future rent at the greater of one year or 15% of the remaining term, up to three years.

That makes the lease your real protection. Do not sign the buyer’s form; as AEGIS puts it, “the buyer’s form is written for a tenant.”

Landlord’s lease checklist

• Rent. Market rent set by appraisal, with fixed annual increases or an index adjustment.
• Term. A base term long enough to support the building’s value and the buyer’s financing. AEGIS calls a ten-year base term with renewals common; SLB Capital Advisors puts typical sale-leaseback base terms at 15 to 20 years.
• Costs. A true triple-net lease, with the roof, structure, parking lot, HVAC replacement, and code compliance assigned in writing.
• Credit support. A guaranty from the buyer’s parent or owners, plus a security deposit or letter of credit worth several months of rent. In sponsor-backed deals, Investment Grade notes that parent or fund-level support “may be unacceptable” to the buyer, so push for a larger deposit or letter of credit instead.
• Cross-default. If you also carry a seller note, a default on the note should be a default on the lease, and the reverse.
• Assignment. The right to approve a new tenant if the buyer sells, unless the replacement meets a stated net-worth test.
• Options. If you grant a purchase option or right of first refusal, price it at appraised value when exercised and keep the response period short.
• Lender documents. Negotiate the landlord waiver and subordination terms the buyer’s lender will ask for, so your rights are not swallowed.
• Environment. A baseline report at lease signing, with the tenant responsible for contamination during its occupancy.

How each choice is taxed

Ask your tax advisor to model all three choices. The general federal rules:

• Selling the building. Long-term gain is generally taxed at capital gain rates, up to 20%, but the part due to depreciation you have taken is “unrecaptured section 1250 gain,” taxed at a maximum 25% rate. If you used cost segregation or bonus depreciation, part of the gain can be taxed as ordinary income instead. In an asset sale, the building and land are Class V assets on Form 8594, separate from goodwill.
• The 3.8% net investment income tax. Above $200,000 of modified adjusted gross income ($250,000 joint), it generally applies to rent and gains for passive owners. A special rule excludes rent, and gain on the building, from the tax when you rent to a business in which you materially participate. Once you sell the company, rent from the buyer generally no longer qualifies.
• A 1031 exchange. Gain on a building held for business or investment can be deferred by exchanging it for other real property under Section 1031, with 45 days to identify a replacement and the earlier of 180 days or your tax return due date, including extensions, to close. Since 2018 only real property qualifies, so the business itself cannot be exchanged. In practice, owners use a qualified intermediary to hold the proceeds.
• Keeping the building. You keep depreciating a commercial building over 39 years and receive rent each year. Property held until death generally takes a basis equal to its fair market value at the date of death, which is why some owners keep the real estate for their heirs.
• A C corporation that owns the building. A sale inside the corporation is taxed at the corporate level and again when proceeds reach you, and distributing the building to yourself triggers gain under Section 311(b) as if it were sold. That is why McLane Middleton and others recommend holding real estate in a separate entity such as an LLC from the day the building is bought; moving a building out of a C corporation later triggers the same Section 311(b) gain.

Our guides to asset versus stock sales, minimizing taxes on a sale, and what you keep after selling show how the building fits into your total after-tax proceeds.

Environmental and closing mechanics

Real estate adds work that a business sale alone does not. A buyer or its lender will usually order a Phase I environmental site assessment, and the EPA recognizes the ASTM E1527-21 standard for that inquiry, which, to preserve the buyer’s CERCLA defenses, must be completed or updated within a year before the purchase, with key parts updated within 180 days. If you keep the building, you remain its owner under federal environmental law, and under CERCLA an indemnity cannot transfer an owner’s liability to anyone else, though the parties can still agree who pays. Selling does not end it either: a former owner can remain liable for contamination that occurred while it owned the site. The real estate is often sold under its own purchase agreement that closes at the same time as the business. AEGIS adds a practical check: “make sure the lease, the option and the purchase agreement describe the same property, the same parking and the same shared areas.” Our due diligence checklist covers the rest of what buyers will request.

Decide before the letter of intent

Beresford Booth advises that “the decision should be made early and ideally before the LOI is signed.” A buyer that has not priced the rent, the building, or a sale-leaseback will reopen the price later. State your plan for the property in the process, and settle the rent, term, and who buys the building in the letter of intent. Our guide to comparing multiple LOIs shows how to weigh an offer for the building against one that wants a lease.

Owner’s decision checklist

• Who owns the building today: you personally, an LLC, or the operating company?
• Is there a written lease, and is the rent at market? Get a broker’s opinion or an appraisal.
• Do you want income for years, or cash now?
• Would you be comfortable as landlord to a leveraged company you no longer run?
• What does your tax advisor estimate for each choice, including a possible 1031 exchange?
• Do you know the building’s environmental history, and do you have a recent Phase I?

Real estate by sector

Specialized buildings raise the stakes. In dog daycare and pet care, yards, drainage, and zoning make sites hard to replace, and in the Barkefellers sale a REIT bought the buildings and leased them to the buyer; our pet care valuation guide covers operating multiples. Preschool and childcare centers are licensed for a specific site, so the lease often has to be in place before a buyer can operate; see our childcare preparation guide. In industrials and manufacturing, plants carry the heaviest environmental review, and our manufacturing multiples guide covers the operating side.

How Salt Creek helps owners with real estate

We set a market rent with you before going to market, so buyers bid on the right EBITDA. We then ask each qualified buyer whether it wants to buy the building, lease it from you, or bring a sale-leaseback investor, and compare those answers alongside price and cash at closing. Jack and Connor Pitts are directly involved in every engagement, and our standard M&A engagements have no upfront retainer.

Frequently asked questions

Should I sell my building with my business? It depends on whether you want cash now or income for years, and on the buyer. Most private equity buyers prefer to lease rather than own, so the choice is usually between keeping the building and leasing it to the buyer, or selling it to a real estate investor at closing.

What is a sale-leaseback when selling a business? A real estate investor buys your building at closing and leases it to the company that bought your business. You receive cash for both, and the investor becomes the landlord. Investors price the building by the rent, the lease length, and the tenant’s credit.

Do private equity buyers buy the real estate? Usually not. Real estate ties up capital they would rather use for acquisitions, so they typically ask for a long lease at market rent or bring in a sale-leaseback investor. A strategic buyer that wants a permanent site is more likely to buy.

How does rent affect the sale price of my business? Buyers reset rent you pay yourself to market. If you charge yourself below-market rent, the buyer raises it to market, which lowers EBITDA and the business price. Higher rent raises the building’s value at the same time, so agree on market rent with an appraisal or broker’s opinion before you go to market.

What lease terms should I ask for if I keep the building? Market rent with annual increases, a long base term with renewals, a true triple-net structure with the roof and structure assigned, a parent or owner guaranty, a security deposit or letter of credit, and limits on assignment to a weaker tenant.

Can I use a 1031 exchange when I sell my business? Only for the real estate. Since 2018, Section 1031 applies only to real property, so you can defer gain on the building by exchanging it for other real property, but not on the business itself. The exchange has 45-day and 180-day deadlines.

How is the sale of my building taxed? Gain is generally long-term capital gain, but the portion due to depreciation is taxed at up to 25%. The 3.8% net investment income tax may also apply depending on your role. If a C corporation owns the building, the gain can be taxed twice.

What happens if my buyer-tenant goes bankrupt? If the tenant rejects the lease in bankruptcy, federal law caps your claim for future rent at the greater of one year or 15% of the remaining term, up to three years. A guaranty and a deposit or letter of credit are your main protection.

Sources

• The Boulder Group, “Net Lease Market Report, Q3 2026.”
• Essential Properties Realty Trust, fourth quarter and full year 2025 earnings release, February 2026.
• SLB Capital Advisors, “Why Consider a Sale Leaseback.”
• SLB Capital Advisors, “Sale Leaseback Misconceptions by Private Equity Investors” and 2025 market release, March 13, 2026.
• BCLP, “Firm Advises Destination Pet on Acquisition of Barkefellers Pet Resort & Spa,” June 25, 2026.
• AEGIS Law, “Leasing Your Building to the Buyer of Your Business,” July 2026.
• Northmarq, “Sale-Leaseback.”
• IRS, Topic 409 and Instructions for Form 8594; 26 U.S.C. §1031, §1014, and §311.
• 11 U.S.C. §502(b)(6); EPA, “Brownfields All Appropriate Inquiries.”