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Updated almost 5 years ago on . Most recent reply

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272
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165
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Michael G.
  • Rental Property Investor
  • Brooklyn, NY
165
Votes |
272
Posts

Should we sign a "Master" Tenant? as Residential or Commercial?

Michael G.
  • Rental Property Investor
  • Brooklyn, NY
Posted

I have a 3 bedroom unit in small residential-multifamily that is for rent, and I've been approached by an "entrepreneur" who is willing to sign a long-term, 3 - 5  year MASTER LEASE, at a slightly reduced rate, if I allow him to furnish the rooms and and sublet each room out in 6 month increments for a decent markup that he will keep.  He basically earns the "spread" each month.  They term it "co-living."

The advantage to me is that for the next 3-5 years, I wont have to worry about renting the unit, any vacancy losses, and also - best of all - he will completely manage the sub-tenants and any of their needs....  Shower-door loose? He handles it.  Oven breaks? Him.  Freezer too warm?  his problem. Even if he can't rent all the rooms, or for as high a price as he thought, we still get paid in full anyway...

Question 1:  Thoughts?  Should we do this, or is there simply too much risk having transient room-tenants who won't treat this apt as their own "home" ? Will it likely cause too much disruption to the other Apts in the building?

Question 2: If we DO decide to test this format out, should we sign the Master-Lease with him as an individual, or in his corporate name? Is there any advantage/disadvantage to each?  Aren't we able to evict for non-payment (assume non-corona conditions) much more quickly & easily with a commercial tenant than with a residential?   (Does it matter that the commercial tenant will still be "housing" people?)

Any other thoughts or pitfalls i didn't think about?  Thanks!

Most Popular Reply

User Stats

752
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287
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Chad Hale
  • Property Manager / Investor
  • San Jose, CA
287
Votes |
752
Posts
Chad Hale
  • Property Manager / Investor
  • San Jose, CA
Replied

@Michael G.  I would do some searching on BP for others experiences using the co-living strategy.  There were several companies trying this over the past couple of years.  Some are not doing well and not paying as agreed.  Tread carefully.

  • Chad Hale
  • Loading replies...