Why It Matters
At some point, a successful business outgrows renting. Operations expand, space becomes limited, and leasing from someone else starts to feel restrictive. For many owners, that is when buying a property becomes part of the growth plan. There is also a smarter way to structure ownership. Keep your business and your real estate as separate entities.
This approach, where the operating company leases from a separate real estate holding company, is one that lenders, accountants, and investors often encourage. It protects assets, strengthens long-term stability, and can open the door to better financing options.
At Enact Partners, we work with many borrowers who reach this stage of growth. They are experienced operators ready to build something lasting. The right structure helps them protect what they have built while positioning for continued success.
Building a Foundation for Stability
When both your operating business and your property are under the same entity, one challenge can affect everything. By separating ownership, you create a layer of protection that gives each part of your business room to operate independently.
The holding entity, often an LLC, owns the property. The operating company leases it under a formal agreement at market terms. This creates clarity in cash flow and keeps business and property finances distinct. If the business changes or transitions, the property remains secure and valuable.
This structure also strengthens your position as a borrower. It allows lenders to clearly assess the real estate’s performance and income while recognizing that the operating company continues to generate revenue.
Why Lenders Like to See It
- Defined income: A lease between the entities creates a consistent income stream tied to the property.
- Simplified financials: Lenders can review each entity’s performance without overlap.
- Clear collateral: The real estate stands on its own, which supports a more focused and confident lending decision.
This structure helps lenders like Enact Partners design loans that match real-world business goals, not theoretical models.
A Real Example: Menifee, California
In Menifee, California, a borrower came to Enact Partners ready to take his business to the next level. He had built a successful company and wanted a property that would give him long-term control over operations.
He found a well-located commercial building that suited his needs. Rather than purchasing it under his operating company, he created a real estate holding entity and structured a lease between the two. Enact Partners financed a $700,000 acquisition loan that allowed him to close quickly and begin operating from his own property.
This structure supported immediate growth and created a clean financial separation that made the loan easier to underwrite. It also set the stage for refinancing with a traditional bank once the property stabilized.
From Construction to Completion: Riverside, California
Another borrower in Riverside, California was taking a similar approach on a larger scale. After years of leasing space, his company had outgrown its facilities. He purchased land, began construction on a new headquarters, and invested his own funds to get the project started.
When the project reached a critical point, Enact Partners provided a construction loan to complete the work. Because his real estate was owned under a separate entity, Enact could focus on the property’s value, construction progress, and collateral strength, rather than mingling day-to-day business operations with the loan.
The completed building became both a company headquarters and a long-term investment. The business leased from the property entity, creating predictable income and a stable base for future growth.
Benefits of Leasing from Your Own Real Estate Entity
- Asset protection: Your property remains insulated from operational liabilities.
- Tax efficiency: Rent paid by the business becomes income for the property entity, which can be used strategically.
- Improved financing: Lenders can underwrite the property as an income-producing asset, often leading to stronger loan options.
- Scalability: As your business grows, you can acquire additional properties under the same structure.
- Equity growth: Rent payments build equity in your property, creating long-term value while funding operations.
What Enact Partners Looks For
At Enact Partners, we value borrowers who plan ahead and structure their deals with intent. Separating ownership and operations shows foresight and discipline. We also look for commitment. In our Magnolia, Texas construction project, the borrower invested substantial equity before closing. That level of participation demonstrated alignment and accountability, which supported a successful funding process.
These are the kinds of partnerships we seek. Borrowers who combine preparation, vision, and real-world execution.
The Takeaway
When your business leases from your real estate entity, you gain control, flexibility, and protection. It is a structure that helps you focus on running the business while your property investment builds long-term value.
Whether you are acquiring, refinancing, or building, this approach supports your business and strengthens your financial foundation. If you are exploring this path, Enact Partners is available to discuss how disciplined private lending can support your plan.
