Definition:
A sale-leaseback is a real estate transaction where the owner sells a property and then leases it back from the buyer, allowing the seller to continue using the property without owning it.
Example:
Linda owns a commercial building where she runs her small business. She needs cash for expansion but doesn’t want to move locations. She sells the building to an investor and then signs a lease to stay in the space as a tenant. This is a sale-leaseback.
Explanation:
In a sale-leaseback, a property owner becomes a tenant and the buyer becomes the new landlord. The seller receives a lump sum from the sale while still being able to occupy and use the property. These deals are common in commercial real estate but can also happen with residential properties.
This strategy benefits sellers who want to free up capital that’s tied up in real estate. For example, a business may use the cash from the sale to reinvest in operations, pay down debt, or fund expansion. The buyer, meanwhile, gets a property with a built-in tenant—usually under a long-term lease.
Lease terms, rental rates, and maintenance responsibilities are all negotiated as part of the deal. Typically, the lease is structured as a triple-net lease, where the tenant pays property taxes, insurance, and maintenance.
Why is Sale-Leaseback Important in Real Estate Transactions?
Sale-leasebacks offer financial flexibility for property owners and create investment opportunities for buyers. They allow sellers to convert equity into working capital without relocating or disrupting operations. For buyers, these deals provide a steady income stream from a reliable tenant. Understanding sale-leasebacks helps both sides evaluate options for maximizing real estate value while meeting short- and long-term financial goals.