Master Lease ROI Calculation and Risks

[Nathan Latka]

Hey Biggger Pockets folks!

Virgin poster here (For past 2 years, I've just stalked all of you, usually just reading what you all write and studying).

I've done two multifamily deals with 22% cash on cash return annually and have been happy with those.

Because of market today, hard to find cheap real estate to buy so I'm looking at rolling up master leases.

Was wondering if you might be able to help me think through a deal I'm looking at in Texas.

Short version is I have unique relationship to be able to buy master lease on building for $800k.

The renters who pay to use the space covered by this lease is a breakfast restaurant concept that I'm an investor in so I have all their financials.

The breakfast restaurant pays $20k/mo to master lease holder (potentially me), and then master lease holder pays building owner about $10k/mo.

Total cashflow to master lease holder is $120k annually ($10k/mo).

I'm tempted to do pull trigger because $120k/yr cash return on $800k investment is better ROI than most other deals I'm looking at currently in apt complex, mobile home, and multifamily spaces. I'm not looking to bring in any other investors and will do this deal myself.

That being said, with this info, what risks do you see? Have you done master lease deals like this in past?

Thanks in advance for any feedback and help!

Hope everyone had a great fourth.