California Real Estate Practice Exam

All of the following are potential benefits of a sale lease back arrangement except?

1. Liquidity of the investment

2. Tax benefits

3. Flexibility of the agreement

4. Fixed rental payments

The correct answer is: Liquidity of the investment

Sale lease back arrangements typically offer the benefit of liquidity, as they allow a company to free up cash by selling an asset and then leasing it back. This can be beneficial for companies in need of immediate cash flow. The arrangement also typically allows for flexibility in the terms of the lease, such as the duration and rent amount. Additionally, the company may also receive tax benefits, such as deducting lease payments as expenses. However, one potential downside of a sale lease back arrangement is that the company will still be responsible for fixed rental payments, which could become a burden if the company experiences financial difficulties in the future. Therefore, liquidity is not considered a potential benefit in the context of a sale lease back arrangement.