What Is a Leaseback in Real Estate? Sale-Leaseback Explained

A leaseback in real estate (also known as a sale-leaseback) is a transaction where a property owner sells real estate and simultaneously leases it back from the buyer. This setup lets the seller access capital while continuing to use the property, whether for business or personal use.

How a Sale-Leaseback Works

1. Property Sale: The owner sells all or part of the property to an investor or company.
2. Lease Agreement: The seller immediately enters a lease with the new owner to continue using the property.
3. Continued Occupancy: The former owner becomes a tenant, paying rent under agreed terms.

Types of Leasebacks

• Full Leaseback: The Entire property is sold; the seller leases back all space.
• Partial Leaseback: Only part of the property is sold, with the seller leasing back a portion.
• Operating Leaseback: Lease classified as operating expense, remaining off the balance sheet.
• Finance Leaseback: Treated like debt; lease accounted as liability.
• Equipment Leaseback: Applies the same principle to assets like machinery or vehicles.

Benefits of a Leaseback

Risks & Considerations

• Lease Obligations: Long-term rent commitments may exceed benefits if the property value grows.
• Sale of Property: Buyer may choose to sell at lease-end, requiring relocation.
• Market Timing: Strong seller’s market increases sale value, but locking in lower rent may limit upside.
• Accounting Treatment: Finance leasebacks may remain on the balance sheet as liabilities.
• Tax/Legal Complexity: Requires expert guidance for structuring and due diligence.

Who Uses Leasebacks?

• Businesses: Corporations sell headquarters or retail spaces and lease back to fund growth or operations.
• Homeowners: Selling their house and remaining in it short-term while relocating or downsizing.
• Equipment-Intensive Firms: Manufacturers selling equipment and leasing it back to maintain operations.

Recent example: AT&T sold 74 office facilities for $850 million, then leased back essential space to continue operations seamlessly.

Practical How-To: Is a Leaseback Right for You?

Check list of steps and requirements:

1. Evaluate liquidity needs vs long-term cost
2. Choose full or partial sale-leaseback based on usage
3. Negotiate lease term, rent escalations, maintenance duties
4. Verify buyer strength and their long-term strategy
5. Consult tax, legal, and accounting professionals
6. Ensure fair market valuation of the property

FAQs

Q: What is a leaseback?
A: It’s when someone sells a property and continues to occupy it by leasing it back from the new owner.

Q: What are the benefits?
A: Immediate liquidity, continued property use, possible tax and balance-sheet advantages.

Q: What types exist?
A: Full, partial, operating, finance, and equipment leasebacks.

Q: Is it safe for homeowners?
A: Can be useful (especially to avoid debt or relocate gradually) but needs careful planning and reliable partners.

Read more: End of lease cleaning

Final Takeaway

A leaseback in real estate is a strategic financial solution for anyone needing liquidity without disrupting the use of their property. Whether you’re a business seeking working capital or a homeowner needing flexibility during relocation, leasebacks provide executional advantages, but they require precise structuring, legal review, and carefully negotiated terms. Always consult trusted advisors before entering a deal.

Written by Vanessa Gallanti. July 11, 2025

Enthusiast about planning, project management, construction materials and technology, and construction. A civil engineer from Los Andes University and a content writer for Kukun.