What problem is the leaseback actually solving?
The owner wants residual income and a familiar asset. The buyer cannot or should not park scarce equity in a special-use building. SBA 7(a) still caps at $5 million for the company (Source: SBA). If the building would blow the stack, a leaseback can keep the opco inside a financeable box. That is a structure reason, not a tax reason. Taxes are a CPA page.
A leaseback also keeps the seller in the ecosystem. That can help a transition. It can also create a landlord-tenant fight with the person who just bought your customers. Write the lease as if you will disagree later.
IBBA Q1 2026’s 83% of >$5 million deals with three or more offers (Source: IBBA) is a reminder to test whether a buyer wanted the dirt. Some did. Some will pay more for a clean lease than for a forced 504 project. Run the process.
| Lease term to lock | Why it moves price | Seller temptation |
|---|---|---|
| Base rent | Company DSCR and landlord yield | Below-market rent to swell SDE |
| Term + options | Buyer stability; later investor sale | Month-to-month “flexibility” |
| NNN vs modified | Who pays roof, tax, insurance | Silence until the first leak |
| Use and alterations | Process changes, pits, mezzanines | “We’ll figure it out” |
| Assignment | Next sale of the company | Blocking the buyer’s exit |
| Environmental | RECs, indemnities | Verbal shrug |
| Early termination | Special-use trap | Seller convenience only |
BizBuySell’s 223-day 2025 manufacturing median (Source: BizBuySell) is long enough to draft a real lease. Do not leave it for week twenty.
How does quality of earnings treat your historical rent?
If you owned both entities and charged yourself a token rent, company earnings are overstated. QoE will impute a market rent. If you charged yourself a luxury rent to pull cash, company earnings are understated and the building story is confused. Pick one honest pair of numbers.
SOP 50 10 8 still wants a 10% injection on change-of-ownership 7(a) files (Source: SBA). A pretty lease does not replace cash. A full-standby seller note still has the standby cost. SBA buyers will underwrite the rent as an operating expense. If that expense is fiction, the DSCR is fiction.
The working-capital peg does not include prepaid rent unless you write it in. Do not mix security deposits with inventory.
What should the first lease draft contain that teasers skip?
Repair responsibilities on roof, slab, HVAC, cranes, and docks. Who can put a pit in the floor. Who owns fixtures. What happens on condemnation. Insurance limits. A restoration clause that does not require the buyer to return a plating line you wanted gone.
Environmental: if a REC exists, the lease and the purchase agreement should not tell different stories. Indemnities are counsel’s sentences. A Phase I that will stale mid-process needs a calendar.
Personal guarantees on the lease recreate owner dependence in a new costume. Some sellers want them. Some buyers cannot give them and still close a 7(a). Say the requirement early.
Combined 7(a)+504 capacity to $10 million (Source: SBA, 2026-07-04 posture) is irrelevant if you are keeping the dirt. Do not quote it as if the buyer were buying the plant.
What does an illustrative rent-versus-multiple trade look like?
Illustrative only.
Opco SDE $480,000 after a market rent of $18,000 per month is in the model. Seller wants $12,000 to “help the buyer.” That $72,000 annual gift raises SDE and the multiple conversation — and steals $72,000 of landlord cash. A 2.6x SDE on the inflated number is not a favor. It is a transfer you will resent when the roof fails. Price rent as rent. Price the company as a company.
A second file: ten-year term, two five-year options, NNN, market rent, buyer has 7(a) for the opco only. Close in the same season as a straightforward company sale because the lease was drafted in month two, not month eight.
How should the teaser describe a leaseback without locating the plant?
“Owner will consider selling the operating company and leasing the industrial real estate to the buyer” is enough. Do not print the rent you wish. Do not print the address. Do not print a unique crane count that maps the shop.
How to sell remains the sequence. The intro call with Jason Taken can include whether you want to be a landlord. Counsel and a real-estate broker for the dirt still own their lanes. Sell my manufacturing business is the pillar.
What happens when you later want to sell the dirt to an investor?
The lease you signed with the buyer is the product. A five-year term with a tenant who is thinly capitalized is a hard sale. A ten-year NNN with options and a tenant who just closed a 7(a) is a different product. Draft the first lease as if an investor will read it in year three.
Assignment clauses that let you sell the building without the tenant’s drama belong in the first draft. So do estoppel and subordination language a lender will want. Do not invent those in year three.
If you and your spouse will depend on the rent, say whether a personal guaranty from the tenant is a requirement. Some SBA buyers cannot give one. That is a fork, not a hallway maybe.
How do maintenance and environmental sit between landlord and tenant after close?
Cranes, docks, roof, and slab fail on a schedule that ignores your retirement. If the lease is silent, you will pay in the relationship even if you “win” the argument. Write the list. Price a reserve if you are keeping an older plant.
If a REC is open, the lease and the purchase agreement must tell the same story about who funds the cure. Two documents with two stories is how lawyers earn a second fee.
Illustrative only: owner keeps 50,000 square feet, ten-year NNN, market rent already in the recast, roof remaining life disclosed, Phase I clean. Buyer uses 7(a) for the opco only. Close tracks an ordinary company sale because the lease was a month-two document. The owner who waited until week twenty to “talk rent” added a quarter.
Should you live next door and wander the floor as landlord?
Usually no. A landlord who still quotes jobs is an owner who did not sell. Set hours if you have a consulting agreement. Set a notice rule for landlord inspections. Do not become the unpaid GM with a rent check.
How should you underwrite yourself as landlord before you insist on the structure?
You will own a special-use building with one tenant — the person who just bought your customers. If they fail, you have a monument and a legal bill. Ask whether you can carry the mortgage without that rent for a year. If you cannot, you are not a landlord. You are a partner in their DSCR. That is allowed if you choose it. It is not a passive retirement.
Insurance, taxes, and a roof reserve belong in your household model. A NNN lease still leaves you with residual risks the lease did not move. Read those residuals.
Illustrative only: owner needs the rent to fund living costs, tenant is a thinly capitalized SBA buyer, five-year term, no guaranty. That is a concentrated credit. A ten-year term with a capitalized strategic is a different credit. Same leaseback word. Different sleep.
What restoration clause turns a leaseback into a surprise capex bill?
A clause that requires the tenant to remove pits, mezzanines, or process tanks at expiry can be rational — or it can be a hidden balloon. Read it as if you were the tenant. Then read it as landlord. If you want the next tenant to keep the pits, do not require removal. If you want a generic box, require it and price the rent accordingly.
How should you handle property-tax appeals and assessments during a leaseback?
If you have an open appeal, say who owns the outcome. If a reassessment is likely after sale, the NNN tenant will feel it. Do not promise a frozen tax bill. Put the current assessment in the room and let counsel write the clause.
Illustrative only: appeal pending, clause says landlord continues the appeal, savings split as written. No hallway promise. The owner who promised “taxes won’t move” funded a fight in year two.
How should you treat a landlord improvement allowance you still owe yourself on paper?
Related-party construction accounts confuse QoE and the lease. Clean them. Either capitalize and disclose or close the account with the CPA before the teaser.
A last landlord habit: open a separate bank account for the rent before close so household cash and landlord cash do not mix. Mixed accounts make year-two arguments with the tenant and with your CPA. Separate is boring and correct.
One more landlord note: if you will store personal iron in a corner after close, write a license for that corner or move the iron. Informal storage becomes a tenant fight and an insurance question.
If you will snow-plow the lot yourself after close, write that as a service or stop. Informal landlord chores become tenant expectations and insurance questions.
Educational information only. Leases, tax on rent versus sale proceeds, and lender eligibility are licensed work. No leaseback guarantees DSCR or a close.