Need Master Lease Option Advice

1 Reply

I'm talking to a seller of a 56-unit apartment building who wants $4M+ for it and it's not worth that because it's only 60% occupied and not run very well.  If we can get it occupied and performing well, then it would be worth the $4M price tag.  The seller owns free and clear and could be open to a Master Lease option.  I've only heard this talked about before but I don't have any experience in it.  What are the typical terms for a Master Lease Option?

thanks!

Hey Steve, I'm not certain what a master lease is, but what I think your referring to is a lease with option to purchase. All this means is the seller is leasing the building to you, which you sublease to the existing tenants. During the term of the lease you are given the ability to exercise your option to purchase for a previously agreed upon price. It is a very simple transaction which can be done quickly, but you must be careful because you are not transferring title. Depending on the state you can record your lease option to purchase which lessens the risk. I would always recommend a lease option with deed in escrow, whereas a lawyer or title company has an executed deed which then only release upon fulfillment of both parties contractual obligation. However, no matter what structure you choose be careful it's still a good deal. Gathering favorable terms will allow you to offer a higher price because your hedging your risk with structure, but you don't want to over compensate. I started my business in Philadelphia with creative deals.

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