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? Send this calculator to your buyers on your own branded listing page — every enquiry comes straight to your WhatsApp. 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.
Turn a calculation into an enquiry
Buyers who run these numbers are ready to talk. Give every listing its own page with your photo, phone and WhatsApp on it — leads land straight on your phone.
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.