Master Lease Agreement for Commercial Real Estate

Master Lease Agreement for Commercial Real Estate

master_lease_agreement_for_commercial_real_estateDiscover the power of the master lease agreement for commercial real estate. For beginners and experts alike, it allows you to control property without having to get a bank loan. It is a foundational tool for all commercial real estate investors.

 

Master Lease Agreement for Commercial Real Estate PodCast

Commercial_Property_Advisors_Podcast

Here is a summary of what you learned in the above video:

Master Lease Agreement for Commercial Real Estate

  • Works with all sort of commercial real estate deals
  • One of the most famous Master Lease Agreements was the “Empire State Building”
  • Someone offered 2 million a year for a 114 year master lease agreement
  • Payments today are still only 2 million a year but now the income is at 6 million
    4 million dollar profit a year

How the Master Lease Agreement Works: (2:33)

  • You buy the property from the owner with a small or no deposit
  • At closing you get “equitable title”
  • Entitles you to all the cash flow, all the tax benefits, and you get all the profits at the set price
  • The terms are set in stone so any value increase on the property is yours to keep
  • The seller gets a monthly lease payment from you

Joe’s Deal (3:50)

  • 168 unit apartment for sale
  • The property was in disrepair and had many vacancies
  • You couldn’t put a new loan on the property because there was a large penalty if the owner paid off the loan early
  • Joe structured a 4 year master lease deal
  • Seller got down payment money for a new deal and got out of a problem property
  • Joe paid the lease and then the seller used that money to pay the mortgage
  • He created 800,000 worth of equity in just one deal in a 4 year period

Two things you must do to land your first Master Lease

  • Get the seller motivation
  • Construct a deal and terms based off seller motivation

In Simpler terms: (6:55)

Seller gets:

  • Lease Payments that cover the mortgage
  • Easy Sale
  • Freedom from involvement
  • Rescued from any personal or financial issues pertaining to the property

Buyer Gets:

  • Purchase with little to no money down, no banks, no credit
  • Less risk because the loan is still in sellers name
  • Cash flow-any money left after lease is paid is yours to keep
  • Option to buy after the agreed upon years
  • All profits

3 Nuggets on YOU Doing a Successful Commercial Master Lease Deal (8:58)

  • Get the seller motivated and construct the deal based on that motivation
  • Unwind your mind on what a typical deal looks like
  •  Master Lease Agreement Document

What Property/Seller is ideal for a Master Lease Deal? (9:47)

  • Seller that is tired and burnt out
  • Seller lives out of state
  • Seller is sick or has other personal reasons for selling
  • Avoid capital gains tax
  • Large prepay penalty on loan
  • Has property management problems
  • Vacancies over 90 days old

Conclusion (19:45)

  • Learn how to solve other people’s problems
  • The Secrets of the Millionaire Mind by T. Harv Eker
    “An Entrepreneur is a person who solves other people’s problems for profit”

Comments

  1. Valerie Robinson says:

    Peter,
    This is great teaching! I received more insight from your videos that all the so called “Gurus” have put out! Its amazing, I can see my investing errors! Your training videos are GREAT! Again, Thank you for presenting them.
    Valerie Robinson

  2. Hi Peter:
    The video was very knowledgeable and something to consider. I am a new investor looking to purchase 5 to 10 units. I don’t have a lot of money to put down. How do I find these type of apartment buildings and investors who are willing to do a master lease agreement? for example you mention foreclose or default properties is there a website that I can go on to look at these properties.

  3. Kameron says:

    Hello;
    Peter I enjoyed this video. It is very informative

  4. Hi Peter,

    Just have one question, wouldn’t any of these types of property owners rather deal with someone who can purchase the property in all cash and give it to them in a discount, rather than structuring a master lease which the owner still has to stay in the deal until the end of the master lease, why would he want to do that if he can get out right away with a cash buyer at a discounted price?

    • Peter Harris says:

      You are assuming that such a cash buyer exists and that this seller has a tremendous amount of options. Sometimes they don’t. Sometimes they don’t reach out for buyers and we find them and they feel that we may be their only legitimate option. But that’s just the beginning of why some commercial real estate sellers choose to do a master lease agreement over selling outright.

  5. Hi,

    Thank you for making these videos.

    How do you keep the profit from the mortgage buy-down? I have heard sooner ways to do it in residential lease options but the story of the 2m per year buy down confused me. If it’s a master lease with an option to purchase for a specific amount, then it would seem that the seller would sell at that price down the road and enjoy the increased equity. I’ll have to ‘reread my copy of commercial for dummies.

    Thanks again for sharing your hard earned knowledge.

    Ernest

    • Peter Harris says:

      It is written into our master lease agreements that any mortgage principal paydowns reduce the option purchase price by that amount.

  6. Hi Peter
    Thank you so much for this informative video. I am investing mostly in single family homes but want move over to multifamily properties in South Africa. These lessons are eye opening. Thanx again!

  7. Thank You Peter
    You should be “Peter The Great”
    Great Education

  8. Kerry Sims says:

    Where can I get a copy of the Master Lease Agreement for CRE?

    • Peter Harris says:

      That is provided to our Protege Program participants but you can also contact a local commercial real estate attorney to create it for you.

  9. charles mcintosh jr says:

    peter
    great video. I now a another tool in my tool box to use.
    I heard of a master lease, but did’n t know how it use .
    now I do
    thanks again

  10. Jesenia Foster says:

    Hello, my name is Jesenia Foster and I was just on youtube seeing a few videos regarding buying apartment buildings and the Master Lease Agreement. I found on craigslist a sister building of 34 units in total. I sent them an email asking them if they do Master Lease Agreements. I am in experienced in this business and would like to know what are the next steps that I should be taking. I have bad credit and need help in figuring out the next steps on this Master Lease Agreement.

  11. Hi Peter: I listened to your video on Master Lease Agreement where in you mentioned the Master Lease Agreement that your company uses. Is there any way that I could see a sample of your companies Master Lease Agreement for purchasing Commercial Apartment Buildings.

  12. That was very,very,very educative. Keep it up.

  13. Peter,
    What a great tool to use. I have a property in mind that I can now put an offer on.
    I look to be in your protégé program soon.

  14. Peter, I love your videos! They are so informative. I have a question. I have a friend whom i’ ve known for a few years. He owns a 4 plex. Can I use the master lease agreement for a 4plex? Also, the seller is very motivated and asked me if I want to buy and for me to find a way to do seller financing. He is 93 years old, very vibrant with his full mind, and has a mortgage with a big prepayment penalty. He bought the building for 725k in 2007 ( in Los Angeles, Ca). He has a balance of 425k. The rents sustain the mortgage with a little left over after the mortgage is paid. He says that he is just tired of managing it himself. He wants some money when selling. What can I do for no money down. A master lease ? Or something else? Please help. I really would love to acquire this building.

  15. Michael Anthony says:

    Hi Peter
    Where can I get a copy of the Master Lease Agreement that used by your company. Thank you for this great information.

  16. William Whiteley says:

    Where can you find this kind of contract? I looked for” Master lease agreement ” and never could find it.

  17. Nico Allano says:

    Peter, I just wanted to say, that you are one of the best methodical and efficient speaker. You have the gift of explaining concepts in the most simplistic form. I love how you put your heart in it. I would not hesitate to by any of your products.

  18. jankely hidalgo says:

    hey Peter
    i have much appreciation for your teachings and videos on youtube. i just signed up for the protege program hopefully i will be chosen. I currently have some money to invest with but i think instead of any other type of real estate investing i can capitalize of starting with a master lease. i would like to know where i can start my search for these types of properties.

  19. Jason Rivera says:

    Hey Peter,

    How do you figure closing costs for MLO’s?

    Both when I sign the agreement with the seller and with the new tenants I bring in?

    Is it only when the options are executed or when both MLO agreements are signed?

    Is there a rule of thumb in terms of costs as a percentage of sale price option amount?

    Thanks a lot

    • Peter Harris says:

      There are no closing costs when the Master Lease Agreement is executed. When you exercise your option to purchase, however, closing costs will come into play. You may be able to get the seller to pay all of your closing costs at the time the option is executed. Contact a local closing company to help you better assess the closing costs for each specific deal.

  20. Eldra Hughes says:

    I am having a problem…. I bought a property and it was turned into a commercial lot so I put a three thousand square ft building on to make a convenient store and across the street is low income housing and I paid for everything out of pocket now I have to get freezers for food coolers for drinks and an AC unit. Also I have to get the front paved and everything else is done. Tell me did I make the right move by spending my own money. Thanks Eldra Hughes

  21. Hi Peter,

    If you only knew how much you have influence a young investor like myself. Hopefully one day I can share my story with you. Thanks a million for your advice and ability to explain complex topics. How does a master lease agreement affect the taxes of the seller. This is a question a buyer would need to know.

    • Peter Harris says:

      They are leasing the property so they are getting rental income. Any commercial owner would know the ramifications of rental income on their taxes; or they could ask their accountant.

  22. James Choate says:

    Peter…you are fantastic! You know how to teach (educate).
    One small question: What happens if the Seller stops paying the mortgage after signing the MLA? Can the Lender take over the property?
    James Choate

    • Peter Harris says:

      First of all, YOU should be paying the debt service directly to avoid such issues. But YES, if the lender is not paid, they can foreclose.

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