For the beginning real estate investor, you need to consider the restrictive terms of commercial real estate financing on apartment buildings and other multi-family real estate investments, which include as much as 30% or more down payment and terms that might not make sense. When you use Master Lease Option advantages to your favor, you can start enjoying monthly income without start-up capital and enjoy the control by vested interest instead of committing to a commercial real estate mortgage. For most people that are involved in commercial real estate marketing, Master Lease Option agreements are a win-win situation that can help the buyer and seller, if executed properly.
There is no need to break out the commercial real estate loan calculator to understand the principle of how the Master Lease Option agreements work. For the beginning real estate investor, it is as simple as understanding the “sandwich lease”, where you essentially lease apartments from the owner or seller and then sub-lease them to another tenant at a higher rent, pocketing the difference. The owner of the apartment building still retains ownership rights and tax advantages until you are able to obtain commercial real estate financing.
The great part about Master Lease Option agreements is that you build the appraisal value and build equity with other people's money through the sub-leases. Because appraisers will consider the amount of income a property generates, this builds equity for the buyer if they decide to purchase or value for the seller, if they walk away. Through the win-win situation, there is an active market of syndicating, where the leases or sub-leases can be wholesaled to other real estate investors for a fee, generating more income and the real estate investor can make a quick profit and move on or the seller can generate badly needed cash, rather than refinance the project because they haven't been able to sell.
The thing about Master Lease Option agreements is that astute real estate investors know how to use them to make money or build equity in rental real estate without having capital at stake. Once you have learned how a Master Lease Option arrangement works, you will find it offers advantages for real estate investors that are interested in buying apartment buildings and sellers can enjoy increased value and higher rental rates, should they walk away. Since the leases and sub-leases can be “flipped” to other real estate investors, the process continues and everybody gains advantages through the Master Lease Option arrangements. For those that learn the techniques, it offers different benefits.
Since commercial real estate financing can be hard to come by and those that have to break out the commercial real estate loan calculator have a hard time moving past the numbers, Master Lease Option arrangements make monthly income for beginning real estate investors, build equity and can help cash flow the entire apartment project. Expert real estate investors know the value of learning the Master Lease Option techniques and understand how a Master Lease Option agreement can be a win-win situation for everybody.