All Forum Posts by: Colleen Sheridan

Master Leases can be used for a variety of reasons, and most are not scams. For instance, an owner may not want continue to operate a building day to day but does not want to pay capital gains on sale if they have low basis, so they lease the entire building to someone who is more willing to operate the building and take on the management. Presumably, the master lease rate will be lower than the market rent so the "operator" can make a profit and justify investment in upgrades and leasing costs for the building. Sometimes a master lease is used when there is a ground lease on the land. This would allow someone other than the fee owner to build a building and "sublease" it to a tenant, a structure frequently used for Fortune 500 clients who have good bankable credit but do not want to build, own or operate their own building. A master lease is just another tool for managing control of real estate. You need to understand the motivation of the seller to determine if the reason is legitimate and make sure the numbers work. Finally, before you enter into a master lease, make sure you have a very good real estate attorney who has experince in structuring these transactions. Let me say that again - experience in doing these specific structures!. You do not...absolutely do NOT want a beginner at this!

Thanks, I have learned a few things from both the attorney and believe it or not, Senator's Dodd's office, I called and one of his staff helped wth this information. In May, Pres Obama signed bill S-896 amended S1036 called "Help families save their homes act", which basically says that effective immediately, tenants in foreclosed properties must get 90 days written notice from the lender before any action to evict can be taken, it is more stringent for Section 8 tenants. The attorney says that on day 89 she will file a motion to stay the eviction of both tenants in housing court and given the sympathetic nature of the tenants and the fact that Mr. B has always been a good paying tenant, a stay would almost be guaranteed to be granted.

I have been told by the broker that the AHMS won't even appraise the property or put it on the majket until all the tenants are evicted as that is their policy. So given that the tenants have not received any notification, we are probably looking at 4-6 months or longer before anything bad happens here. So, I think the lender may want to have a civil discussion with Mr. B and be reasonable about the price. At least that is my hope. Thanks for the suggestion about co-ownership, but the attorney tells me that if Mr. R, (the section 8 tenant) was to purchase real estate, he would probably lose section 8 status because it would increase his assets, but we are looking into that.

Chris,
I am a commercial real estate consultant and have been doing it for the past 20 years. I advise companies on buy vs lease decisions, advise on how different lease clauses impact the value of property, help companies in an M&A evaluate the value of leased or owned locations, assist in leveraged sale/leaseback transactions for a fee, complete due diligence for property acquisitions, such as reading all the leases, verify the operating expenses...stuff like that.... As far as Mr B goes, I am helping a friend, not getting paid as a consultant, and since there is no money in this deal, no residential broker is going to help him or I would have gladly handed this off. That is why I am seeking expert advice on Bigger Pockets. BTW, I got him an attorney pro bono, so that takes care of the legalities, I am just wondering how I can help him obtain his wish of owning this property. While I know my way around a commercial deal, my residential experience is limited to buying my own house.

You should not apply all the rent to their purchase price. You deserve to get a return on your investment for the next 6 months and you should not eat the expenses of running the building for the next 6 months. By crediting the rent, in effect you are giving thema discount off the purchase price. Keep that in mind when you are pricing your property.

If you like the broker and he/she has been good to you, why don't you hire the broker on an hourly or retainer basis, then, upon success, give them the listing and ask them to credit the fee you paid toward their commission. I would not waste my time providing comps for free. My mentor once told me, "Time is a non-renewable resource. once used it is gone for good!". If I am doing anything for free, I would rather be sunning on the beach!

If you are using a commercial broker, they should be able to help with comps. LoopNet or CoStar may have some comps depending on the area (they do not cover everything. My experience is that the best place to get comps is to go to Town Hall. They have all property information in the assessor's office. You can go through all the comparable properties in the neighborhood and check out the last sale date. It will tell you what the property sold for and how it compares to the subject property. For instance, the square footage, any permits for recent improvements, land size, condition etc. It is a more tedious, but reliable way to get comps. Finding commercial comps on-line is not the best way, in my opinion, to get accurate information.

I am trying to help an elderly (70 year old) gentleman purchase the property where he is a tenant. He has lived there forever and did not know the property was being foreclosed until a truck showed up one day to tell him they were there to clear the building and lock it up. It nearly gave him a heart attack. He called me, I found out who had sent them (the broker on behalf of the lender) and told them that Mr. B would call the police if they touched one item of his stuff. They left. I spoke to the broker, who had never seen the property and didn't even know the three family home had two rent paying tenants (one a section 8 disabled minority) and got nowhere with him. Finally, I tracked down the lender, American Home Mortgage Service and complained about the way Mr. B was treated. They said it was not their policy, oversight, broker was not authorized, blah, blah. Bottom line, this is a poor neighborhood and I think the broker thought he could take short cuts. Anyway, they said Mr. B needed to be "pre-qualified" by their mortgage broker (which we did for $100,000) and my question now is what do I do next. The broker, who has not put the property on MLS yet is clueless. He told the mortgage guy the property was worth $200,000, it is worth $50-70,000, needs a new roof that is estimated to be $20,000. It is behind a bar and three houses away from a junk yard in the city of Hartford. The broker has never been there and told the mortgage broker he has not seen the property but knows the market. Mr. B has not received any notice from anyone. We sent a letter to the broker asking where the rent should go and his reply was..I don't want to make it harder to evict him so I am not telling you. Any suggestions would help.

We joined Twitter (mysquarefeet) and quickly have about 70+ people following me. I find it drives traffic to the site, and the best way to get more people to follow you is to follow them. It also distributes our new blog postings.

I am not sure that this will help make us money, but more hits to our site helps our ranking. We use Facebook too, but I don't find that as useful for business.

Josh, as you know I am new here, but I think the site might be easier to navigate if you had more topics on your forum page. For instance instead of just "General Real Estate" you could break it down into multi-family, office, REO, etc. While the broad categories are good, more specific catagories would let people who are only interested in one property type easily find the forums best for their business interests.

Welcome Tom,

I am pretty new here myself, but I have 20 years experience consulting on commercial real estate. First thing you need is focus. Most successful commercial investors stay in one property type, like office buildings. The reason is that experience makes every acquisition easier and if you have several properties in the same market, then you can spread the expenses, such as purchasing power for building supplies, legal fees if you use the same lease in all your properties, management fees...and the list goes on. You also need to make sure you get on the radar screen of commercial brokers so they think of you when they get a listing. Good luck.