Master Lease Option Transactions Offer Better Alternatives For Commercial Financing

There are some new real estate investors that might not be familiar with Master Lease Option transactions, but they can offer advantages over other commercial financing methods. These transactions can be an attractive alternative to commercial financing for those considering ways to obtain apartment financing. They can also be used for other types of commercial real estate investing, like mobile home parks or storage unit facilities.

Also known as “sandwich lease options” by seasoned real estate investors, Master Lease Option transactions are simplistically described as transactions where a single person signs a lease agreement on an apartment and then sub-leases the unit for a higher amount of rent, pocketing the difference. The more units that are leased this way, the more money you pocket, which is a way to use other people’s money as a commercial financing alternative. Master Lease Option arrangements are easier and quicker to implement than trying to obtain a commercial mortgage loan. Not only can you make additional income, but you don’t have any of your own capital tied up, like in the case of other commercial loans

The Master Lease Option is a technique that works well on multi-family dwellings, like apartment buildings or duplexes, but any unit rentals can be handled with the same technique, which is why some real estate investors are using Master Lease Option on self-storage units and mobile home lot rentals, too. Essentially, you can use the Master Lease Option techniques in a variety of circumstances, but you don’t want to experiment with fixer-upper properties, luxurious properties or those that aren’t easily leased to others because that can make a difference in how well the Master Lease Option technique works.

When you are thinking about getting into commercial real estate investing, but don’t have enough of your own capital or might need to start out slowly, Master Lease Option arrangements can help you make income each month, become actively involved with the apartment or multi-unit property and allow you to establish realistic income expectations and projections. There are other advantages to Master Lease Option arrangements because you can sell your interest in the master lease agreement to other real estate investors in a process known as “flipping the contract”, or “syndicating” and you can enjoy a fee for transferring your interest, generating more income.

Sometimes, it can be difficult to obtain commercial financing when it comes to commercial real estate investing, but Master Lease Option transactions offer an alternative method to apartment financing that allows you to slowly grow your “vested interest” in an apartment building, duplex or multi-family dwelling. It can be easier to obtain a commercial mortgage loan when your “test-drive” of the property is complete because you will have a history with the property’s income-producing capability. You can make monthly income while you decide whether you want to purchase the property, if you decide you want to at a later time. Many of those involved with commercial real estate investing will become involved in numerous Master Lease Option transactions to enjoy additional monthly income, however.

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Tags: apartment financing, Commercial Financing, commercial loans, commercial mortgage loan, commercial real estate investing, Master Lease Option