Sale and Leaseback Calculator
Compare the cash released by selling premises and leasing them back against the extra annual cost, and the return the cash must earn.
Are you a real estate agent or broker? Agents use this to answer a buyer question and capture the buyer in the same link: one page, your branding, WhatsApp enquiries. Create free agent page →
Selling premises you occupy and leasing them back converts a building into cash and a rent commitment. It frees capital for the business, and it replaces an owned asset with a long-term liability at whatever yield an investor requires.
The test is simple: the released cash has to earn more in the business than the extra annual cost. That hurdle rate is usually higher than owners expect.
The calculation
Net proceeds are the value less selling costs, and the cash released is what remains after repaying any mortgage. The rent is the value at the buyer required yield. The extra annual cost is that rent less the interest you currently pay, and dividing it by the cash released gives the return the money has to earn.
Worked example
A 1,200,000 property sold with 3% costs nets 1,164,000, and after repaying a 500,000 mortgage releases 664,000. Leasing back at a 7% yield costs 84,000 a year against 30,000 of interest today — 54,000 more. The released cash therefore has to earn about 8.13% a year just to break even.
The lease is the real negotiation
Buyers pay more for a long lease with strong covenants and upward-only reviews, so a higher price is bought with a heavier commitment. Compare offers on price and lease terms together, because a better headline price on a twenty-five-year upward-only lease may be the worse deal.
One page per property, ready in minutes
Photos, price, location, the documents a buyer asks for, and this calculator — on a page you can send in a single link. No website build, no coding.
Create your free property pageFrequently asked questions
When does sale and leaseback make sense?
When the business can genuinely earn more on the capital than the extra rent costs, and needs the cash for growth rather than to cover losses. Using it to fund operating deficits converts a solvable problem into a permanent obligation.
What lease length will a buyer want?
Usually long — ten to twenty-five years — because the income durability is what they are buying. Shorter leases mean a lower price, so there is a direct trade between the cash you release and the flexibility you keep.
What are the risks?
Losing control of premises the business depends on, rent reviews that outpace what the business can bear, and dilapidations at the end. The building also stops being available as security for other borrowing.
More commercial calculators
Valuation from yield
Income into capital value, and how sensitive it is.
CommercialTotal occupancy cost
What a commercial lease really costs per square foot.
CommercialCovenant strength
What the tenant credit is worth in capital value.
CommercialRent-free period value
What a lease really costs once incentives are counted.
CommercialService charge share
Your share of the building costs, checked.
CommercialRent review uplift
The new rent once caps and collars are applied.
CommercialBreak clause value
Whether exercising the break actually saves money.
CommercialDilapidations estimate
The exit liability, and the cap that limits it.
CommercialTurnover rent
Base rent plus a share of sales, and where it starts.
CommercialEmpty property tax
What an empty commercial unit costs to hold.
CommercialCommercial fit-out cost
A fit-out budget that includes what quotes leave out.
Home loanMortgage payment
Monthly repayment, total interest and the true cost of the loan.