If you are planning to sell your daycare centre, one of the first decisions you will face is: what exactly are you selling? Are you selling just the business (leasehold), the business and the property (freehold going concern), or just the property as an investment? Each option has pros and cons, and the best choice depends on what you own and your financial goals. Let’s break it down.
Option 1: Selling the Business Only (Leasehold)
This is when you sell only the daycare business, not the land or building it operates from. The buyer takes over enrolments, staff, equipment, goodwill, and your lease with the landlord. This is called a leasehold sale. It is common when the owner does not own the property or wants to keep it and become the new owner’s landlord.
What buyers look at:
- Profit after rent (how much money the centre makes once rent is paid)
- The length of the lease (more years left is better)
- The amount of rent (too high can reduce value)
📌 Tip: Buyers prefer a lease with at least 10 years left. A short lease (for example, 2–3 years with no renewal) can deter buyers.
Leasehold sales usually sell at higher yields, meaning buyers expect a greater return for the added risk. The upside is you keep the property and earn ongoing rental income.
Option 2: Selling the Business and the Property (Freehold Going Concern)
If you own both the business and the property, you can sell everything as one package. This is called a freehold going concern. The buyer becomes both the childcare operator and the landlord. This option is attractive to buyers who want full control and fewer complications. It is also easier to manage as one single deal rather than two separate ones.
Why it often sells for more:
- No lease risk (the buyer owns the land)
- No need to renegotiate with landlords
- More types of buyers are interested, including investors
Freehold childcare centres are usually valued at lower yields, which means a higher price for you.
📌 Example: A freehold deal might sell at a 12–15% yield, while a leasehold deal could be closer to 20% due to the extra risk.
If your goal is to achieve the largest one-time payout, this is often the best option, provided you are comfortable selling the property as well.
Option 3: Selling Just the Property (Freehold Investment)
If you have already sold the business or plan to lease it out, you can sell just the property. In this case, the buyer is usually an investor who will look at rent paid, tenant strength (big-name operators are a plus), and lease length.
📌 Tip: A strong lease—long term, fair rent, and a quality tenant—can help you achieve the highest property price.
Childcare properties are seen as safe, long-term investments, so demand is high, especially in metro and high-growth areas.
What About Centres "Under Management"?
“Under management” means the centre is run by a manager, not the owner. This matters whether you are selling leasehold or freehold. Buyers prefer under-management centres because they are easier to take over and do not require the buyer to be hands-on. If your centre depends heavily on you, buyers may ask you to stay on during handover or reduce their offer.
📌 Tip: Train a second-in-charge or hire a centre manager before selling. It adds value and attracts more buyers.
Which Option Is Right for You?
- You do not own the property → Sell the business only (leasehold).
- You want the highest sale price and a clean exit → Sell business + property (freehold going concern).
- You want ongoing rental income → Sell the business only and become the landlord.
- You have already sold or leased the business → Sell the property as a childcare investment.
In all cases, the buyer must have or obtain Provider Approval to legally run a childcare centre.
Final Thoughts
Each selling option has advantages and disadvantages depending on your goals, whether you own the land, and how involved you want to be after the sale. Before deciding, it is smart to speak with a specialist childcare business broker, your accountant or financial advisor, and your landlord if you are a tenant.
At Mollard Advisory, we help daycare owners across Australia explore their best path to exit, whether that means a leasehold sale, freehold sale, or a custom strategy in between.
Ready to explore your options? Let’s talk.
Frequently Asked Questions About Selling Freehold vs Leasehold
1. What is the difference between leasehold and freehold in simple terms?
- Leasehold: You are selling just the business, not the property.
- Freehold: You are selling the business and the property together.
- Freehold investment: You are selling only the property, usually to an investor, with the tenant staying in place.
2. Can I sell the business but keep the property?
Yes. Many owners sell the daycare operation but keep the building. This way, you become the landlord and earn rental income from the new owner. It is a good option if you want passive income or expect the property to increase in value.
3. Will I get more money if I sell the business and property together?
Often, yes. A freehold going concern usually attracts more buyers and a higher overall sale price because it is simpler and gives buyers full control. However, it also means giving up the property.
4. What is more popular with buyers: leasehold or freehold?
Both are popular but attract different buyers. Freehold appeals to investors and large operators who want long-term control, while leasehold suits operators who want to expand without buying real estate.
5. If I am a tenant, should I renew my lease before selling?
Yes. Buyers want security, and a lease with only a few years left can be a deterrent. Renew or extend your lease before selling, ideally for 10 or more years including options.
6. How do I know what my freehold property is worth?
The value depends on the rent being paid, the length of the lease, the strength of the tenant (well-known operators often increase value), and local property trends. A specialist broker or valuer can provide an accurate assessment.
7. What does “under management” mean and does it affect the sale?
“Under management” means your daycare is run by a director or manager, not you. This is attractive to buyers, especially investors who do not want to work on-site. Centres that run smoothly without the owner tend to sell faster and sometimes for more money.
8. Will the buyer need Provider Approval to operate?
Yes. Whether they buy the business only or the business plus property, they must have or apply for Provider Approval from the state’s education department. Without it, they cannot legally run a childcare centre. A good broker can screen buyers and guide them through the process.