Help me pitch a master lease option to seller

[George Maka]

I recently went to a creative financing meeting and got very inspired with what we spoke about. One of the topics covered was master lease options, or sandwich lease, and as he was doing a demo on how to pitch it. While demonstrating how to bring it to owners, it made complete sense.

I've found a 3 bd, 2 bth home in my area that is already renting for about 300 below mark rent and believe this strategy will work if they agree. I remembered bullet points of what works from the meeting, but when I spoke to the owner over the phone, it did not come out the same. I know what's in it for me, but for me to sell it, what's in it for them and why would they agree to it? A few points that I recall from the meeting;

Long lease = discount in rent

I'll find the tenant and fill it

I'll screen tenant and you can approve if you like

When I spoke to the owner, one thing I said was, if I can guarantee that I will lease it for atleast 5 years, would you be willing to discount the monthly rent? She is open to it and I believe they will discount it for a longer lease, but her counter was, you can't guarantee anything unless you give me the entire amount upfront. I have an appointment with them tomorrow and hope to have it down better by then. Help me pitch this and overcome this objection.

Thanks,

George

[Brian Gibbons]

Hi George,

Sandwich lease options are for investors that have reserves. Do you?

I think you need 4 - 6 months x rent for maintenance and "managing" the tenant buyer you have sub leasing, and sub optioning the Owner's property.

RISKS!

Tenant Buyer is late and you pay the Owner anyway.

Tenant Buyer damages property and you pay it as you are responsible.

Tenant Buyer needs eviction and you pay that.

Tenant Buyer get sued (accident injury) and you get caught up in that.

Then there is the basic liability of the TBer suing you for the option money back.

And if the TBer does not get financing, you are letting the Owner down because of the promises made to her.

You need great legal advice and a great property manager for sandwiches, and you need to make sure the TBer gets FICO counselling and mortgage counseling.

I have been doing these since 1986, and I do not recc them to rookies. You are better off Sub2 purchase or lease option assignments.

MLO (Master Lease Options) on apartments or Multis is another issue. This is where you GUARANTEE the NOI, and improve the performance of the apartment building. You improve condition, usually with private funds - jv partners - syndication, like paint, carpet, fixtures, raise rents, improve profit centers of laundry coin operated, etc. and then in 2 - 3 years either sell your option or exercise your option, buy it and keep it. Dodd Frank has defined the term ‘‘multifamily properties'' to mean a residential structure that consists of 5 or more dwelling units.

@John Jackson pipe in here.

@Bill Gulley undefined please give your input too.