A master lease gives the tenant (Master Lease Investor) rights that help make it an ideal solution for the investment dilemma. Master tenant gets two major rights through a master leasing contract: Pros` long-term lease without option often acts as a stealth option, as the landlord must negotiate with you to withdraw your lease from the property in case of refinancing or sale. With a master-leasing in various ways, you can test a property before deciding whether you want to buy or not. The example of the property is an apartment building, estimated at US$10 million and 80% occupied. In addition, the property would generate one million NOI if it were fully occupied. Undoubtedly, you want to buy the building, renovate it, and then sell it for a profit. Theoretically, you can buy it with a loan by depositing 40% or $4 million. But they only have $2 million in capital. At the end of the day, you accept a five-year master leasing contract with an MLA price of $10 million. I have nothing against being a lawyer, and there are great real estate lawyers out there, but sometimes the wrong lawyer can desseure.
This is what happens to me, as Joe`s lawyer was uncomfortable with the wrap mortgage structure because he invoked the sale clause due. Before you went down my throat, I explained to Joe the risk of due-over-sale before we signed the LOI. Many investors are more afraid of a long-term lease as a principal tenant than of buying an investment property. I think it is an irrational fear, because it is easier to terminate a lease than to exit the stock, so the liquidity risk is lower with a master`s leasing strategy. As an owner, the master leasing contract is the answer to all permanent real estate that does not work as it should not work, but no longer interests the owner enough to make improvements and investments. Finding a tenant is the best way to look after the property without losing value on the initial investment. There is a risk of ensuring that the tenant will be able to pay the rent and develop the property, but in fact, the burden of this responsibility rests on the tenant in accordance with the contract and not on the landlord. Hello, Peter, I`m so excited that I came across your you Videos on YouTube. Thank you for clarifying everything enough for a beginner (me) to understand. I am still in the training and research phase, but I know I want to use the GWG as my first legal agreement for the acquisition of commercial real estate.