Acquiring a business & purchasing the property as part of the acquisition?

searcher profile

November 01, 2020

by a searcher from Bridgewater State College in Providence, RI, USA

Does anyone have experience in which the property was part of the acquisition? Any problems this caused post acquisition?

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Reply by a searcher
from Bridgewater State College in Providence, RI, USA
All, this is excellent feedback and is greatly appreciated!

^redacted‌ are their scenarios in which you're able to purchase the real estate without a sizeable down payment? I've been looking at SBA 504 loans.


Here's the situation:
Current owner of the business doesn't own the building, and the current owner of the building is looking to sell. New landlord will either want space for their own business, or raise rent to such a level that it would be beneficial to purchase the real estate from the current owner. Location is quite important as the business has been there for ~60 years (selling high ticket items). Purchasing real estate will require a significant down payment which could have been used for growth & expansion. I'm thinking my best options are either: 1.) convince current property owner to extend lease (10 years) with higher monthly payments, or 2.) shorter term 5-7 year lease to own (not ideal but possibly the only option).
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Reply by an intermediary
from Wake Forest University in Winston-Salem, NC, USA
I'd say about a third to of our transactions include the real estate. You'll find that adding the real estate significantly improves length of amortization and therefore the debt service on the entire loan package (lenders typically love real estate) -- often such that the debt service on the business and real estate is less than the debt service on the business plus the real estate lease. After the transaction, you are then in control of your property and don't have to take a landlord's future actions into account (for some, that can be an important factor). But if it is a relocatable business, and you aren't sure about the location, you can follow ^redacted‌'s advice above and lease with an option to purchase.
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