Master Lease Option Revealed

Master Lease Option is one of those niches that sounds really good in theory just make sure it’s not your only focal point.  For starters this niche is NOT the easiest or the next get rich quick scheme and it has been around for years although 99% of all Master Lease Options (MLO) fail.

Before I reveal these secrets let me explain exactly what MLO is in a “1-2-3 nutshell”

1.    MLO is where the Seller of a Commercial property agrees to lease “You” the entire property as their one tenant.  This means you become their one tenant hence the name Master Lease.  You guarantee the current gross rents (what’s coming in – as income).  You benefit by pocketing all the new income from bringing in new management, raising the rents and filling the vacancies.

2.    You control the entire property as the Master tenant by putting down a deposit.  You then have an “Option Agreement” to purchase the property at a later date for an agreed purchase price, hence the name Master Lease Option.

3.    You never actually close on the property since you have a lease in place until you exercise the option to purchase, so you can always walk away if you do not achieve the income potential of the property.  The only thing at risk is the deposit and even that can be negotiated as a refundable deposit if you’re dealing with a motivated seller.

If you happened to attend a multi-day event on this niche than consider it your intro to what’s yet to come and you’re in the right place now. If you’re fence sitting on attending one of these niche trainings, well you can thank me later!

What Are The Best Type of Properties For Master Lease Option?

You have the best shot for a Master Lease Option if you know what I’m about to reveal for the first time here.  It works best for Apartments and Self Storage facilities although it can also work for others.  My students using my techniques for MLO find Self Storage the ultimate property type with the best fit.  Remember; never try to pound a square peg into a round hole.  You need multiple exit strategies when it comes to commercial investing and for that reason alone, niches are tough if you don’t have an alternative approach.

So what are the criteria for the hottest MLO property type?

Self Storage MLO Criteria

1.    40% Occupied – 60% Vacant
2.    Second Generation
3.    Roll Top Doors
4.    Little To No Maintenance
5.    Easy To Manage
6.    Motivated Sellers

Chances are when you’re speaking to owners or brokers about Master Lease Option you’re going to hear a few rebuttals.  It’s important you know how to address them at the very least.  What I did was this… I noted where most of my students get hung up and here it is for the first time.
Q.  Why should I let you lease my property?
A. Your Property is on the market considered a liability (not producing income) not an asset.

Q.  What if you don’t do a good job leasing up the property?
A.  You can simply evict me just as a tenant because I am a tenant just under a master lease

Q.  I don’t want to do a Master Lease I want to sell not do a Master Lease Option
A.  Would you entertain any seller financing or a possible joint venture?

If you’re dealing with an owner that is less than motivated chances are you’ll be answering one of the above.  Master Lease Option is always a possibility just make sure you don’t put all your eggs in one basket as they say!

I always say “Be A Generalist Not A Specialist” concentrate on the low hanging fruit and have all the tools ready it’s best to know your exit strategies:

•    Seller Financing
•    Seller financed with a subordinated second
•    Low Ball all cash offer
•    Purchase Seller Lease Back
•    Joint Venture

Additional MLO Secrets Revealed

It’s very important to spell out the respective responsibilities and point out the benefits to the seller instead of to you.  Typically, the owner will remain responsible for taxes, insurance and capital expenditures.  That means if the HVAC (heating – air conditioning) goes or the roof leaks, it’s at the sellers expense. But minor repairs from broken glass to leaky faucets would be your responsibility as the master lessee.

When looking to move on an MLO make sure to take care of the property as if it were your own.  Not only is it the right thing to do but It will also assist you in having a good reputation and helpful when you pursue other Master Leases and purchase-option opportunities.  Since you won’t be living there, only accept tenants that will care for the property and be sure to have the right management in place! simply click the link below to learn more:

http://www.cashflowcommercial.com

Tags: commercial real estate, joint venture, JVF, Lease Option, Master Lease Option, MLO, one tenant, Option to purchace