Everything You Need to Know About A Sale-Leaseback

By Kathleen Morgan

This year has been filled with unique challenges and uncertainty for medical professionals. COVID has taken an already-stressful profession and made it even more so. If you own your practice and the building you practice in, one way you can minimize stress is a sale-leaseback. Maybe this is something you’ve never thought of, but in these unprecedented times, it’s something to consider. Here are some sale-leaseback examples and benefits you should know about before committing.

What is a Sale-Leaseback?

With a sale-leaseback, you sell your property to a real estate investor. Unlike other real estate transactions, a sale-leaseback includes you (the former healthcare group) renting out the property from the new owner. The healthcare group becomes the tenant, and the new owner becomes the landlord.

There are two arrangements that must happen in a sale-leaseback. The first is selling the property you own and occupy it at current market rents. The second is the new owner agreeing to lease the property back to you with a long-term agreement.

Sale-Leaseback Examples

Sale-leaseback transactions are most common in the commercial real estate space, especially with businesses that have sizable fixed expenses. Typically, real estate is a business’s biggest expense after payroll. A sale-leaseback allows the healthcare group to sign a lease and sell the real estate based on cash flow. Upon the sale, the healthcare group is able to enjoy the influx of cash from the sale.

If you’re a medical practitioner who currently owns the place where you practice, a sale-leaseback may be able to help you, especially right now if you’re overworked and overwhelmed during COVID. Being a real estate owner is always stressful, and if your practice is struggling financially, you’ll have even more stress.

When you’ve dedicated your whole life to building a successful medical practice, the last thing you want is the virus to take it down. A sale-leaseback allows you to keep practicing as a tenant, while selling the real estate and enjoying the profits. You can continue on with business as usual, but as a renter, not a property owner.

Benefits of a Sale-Leaseback

The biggest benefit of a sale-leaseback is that you sell your real estate based on cash flow and typically get a great return on investment and cash in pocket. Many medical practices are suffering financially. People have lost their jobs and their insurance during the pandemic, meaning they are no longer scheduling elective procedures. In addition, people don’t feel as safe going to the hospital for procedures when COVID is still present. Even some necessary elective procedures have been overlooked.

When you sell your property, you typically have instant cash flow. This gives you more freedom to improve your practice, pay down debt, have liquidity, and more!

At a time of so much uncertainty, renting your property rather than owning it can give you peace of mind based on the cash you will receive from the sale-leaseback. Because healthcare investments are one of the strongest asset classes to buyers right now, identifying a qualified buyer can happen quickly.

Find Out How a Sale-Leaseback Can Benefit You

The real estate you have your practice in is valuable to investors. You’ve worked hard to make your practice great. Start enjoying the benefits of a sale-leaseback!

If you’re ready to see what a leaseback can do for you, DOCPROPERTIES can help. Go to our calendar and book a time to chat with  Trisha. We can help you decide how to best move forward. Get in touch today!

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