If you are a business owner in Kent, Auburn, Everett, or Tacoma, there is a good chance you made a smart decision twenty years ago. You bought the building your business operates in.
Back then, it was just a warehouse or a manufacturing shop. Today, with the explosion of industrial real estate values in King and Snohomish counties, that dirt is gold.
As you approach a 2026 exit, you face a complex dilemma. You have two distinct assets: the operating business (the cash flow) and the real estate (the appreciation).
Do you sell them as a package deal? Or do you sell the business and keep the building as a landlord?
At CTA Business Brokers, we help owners model both scenarios. There is no “right” answer, but there is definitely a “most profitable” answer depending on your retirement goals. Here is how to decide.
The Case for the “Sale-Leaseback” (Becoming the Landlord)
This is often the most popular strategy for owners who want to retire from the daily grind but aren’t ready to stop making money.
In a Sale-Leaseback, you sell the operating business to a new buyer, but you retain the legal ownership of the property. At the closing table, the new owner signs a long-term commercial lease (typically 5 to 10 years) with you.
The Pros:
- Passive Income: You trade the stress of payroll and customer service for a steady monthly rent check. In the current market, industrial lease rates in our region are incredibly strong.
- Tax Efficiency: You delay the massive capital gains tax hit that would come from selling the property right now. You can let the property continue to appreciate.
- Deal Security: Buyers like this too. It lowers the amount of cash they need to bring to the table (since they aren’t buying the building), making the business easier to finance.
The Case for the “Clean Break” (Selling the Package)
For some owners, being a landlord is just another job they don’t want. If your building is older and requires significant maintenance (roof repairs, HVAC issues), keeping it might be more hassle than it is worth.
The Pros:
- Maximum Liquidity: You get a massive lump sum for both assets at once. This is ideal if you plan to move out of state or want to dump the cash into a diversified investment portfolio.
- Buyer Appeal: Some strategic buyers (especially large competitors) want to own the real estate. They want control over their facility and don’t want to answer to a landlord. Offering the real estate can sometimes be the tipping point that gets a deal done.
The “Fair Market Rent” Trap
Whether you sell the building or lease it, you must understand how Rent affects your Business Valuation. This is where many DIY sellers lose money.
Many business owners pay themselves “artificially low” rent. You might own the building and charge the business $0 in rent, or a rate far below market, to keep cash in the company.
While this makes your business look more profitable on paper, sophisticated buyers won’t fall for it.
The Valuation Adjustment:
When CTA values your business, we have to “normalize” the rent.
- If you pay yourself $0, but the market rate for a warehouse in Fife is $15,000 a month, a buyer is going to subtract $180,000 a year from your profit.
- Why? Because they will have to pay that rent (either to you or a new landlord).
- This reduces the SDE (Seller Discretionary Earnings) of the business, which lowers the business sale price.
However, this isn’t “lost” money. It is simply shifting value from the Business bucket to the Real Estate bucket. Understanding this math is critical so you aren’t shocked by the valuation number.
The Lender’s Perspective in 2026
In the current lending environment, Small Business Administration (SBA) loans are the fuel for most sub-$5 million deals in Washington.
SBA lenders love real estate. If you include the real estate in the sale, lenders are often willing to stretch the loan term from 10 years to 25 years.
This lowers the monthly payment for the buyer, which actually allows them to pay you a higher price for the business because the cash flow coverage is better. Sometimes, selling the real estate is the secret weapon to getting a higher multiple on the business itself.
Charting Your Path
Real estate adds a layer of complexity to any transaction. You need an environmental assessment (Phase I ESA). You need a commercial appraisal. You need a lease agreement that protects you as the landlord.
You cannot afford to guess on these details.
At CTA, we analyze your specific situation. We look at the rental market in your specific zip code – whether it is an industrial park in Woodinville or a retail strip in Renton – and help you calculate the net after-tax proceeds of a Sale-Leaseback vs. a full divestiture.
Your building is a fortress for your wealth. Make sure you use it strategically.
Contact CTA Business Brokers today for a real estate and business valuation strategy session.