Video: Sale-Leaseback in ETA - Risky or Legit?

What is a sale-leaseback, and why are people in Entrepreneurship Through Acquisition using it?

Transcript:

Nobody is talking about this business strategy. It's kind of risky, but this entrepreneur says it made them $15 million and acquired 14 businesses for free. So, follow along here and don't shoot the messenger. Here's the playbook: You look for businesses for sale where the property is included. They say six times out of 10, the real estate portion is going to sell at a relative discount to make the overall transaction more attractive.

Before you even close the deal to buy the business and the real estate, you're going to find another buyer to sell only the real estate portion and agree to do a lease-back. You're going to sell them the property and lease it back, pay them rent starting day one on a long-term lease agreement, able to sell it for way more and collect on the arbitrage. Plus, it's more valuable because they already have a tenant on day one. Now all you have to focus on is running your gas station.

It's risky to execute, but the most controversial piece is that you often have to keep this a secret from the original owner or else, why would they sell to you at a discount? This entrepreneur says that over four transactions, the proceeds from the sale-leaseback covered not only the equity injections to acquire the actual businesses but profited four or five million dollars. Tell me what you think of this. Is this too risky? Could you pull it off?

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