Master lease opportunity

2 Replies

A good friend of mine owns a condo free and clear. They are unfortunately way behind on HOA dues which resulted in a lien. They are also behind on property taxes. They don't have the credit or cash to do anything about it and aren't very interested in selling at a discount to an investor on the cheap. They have been living in it and had trouble selling it on the market. It has however been fully rehabbed already. The property sits at the end of a mesa with panoramic view of the city. I offered to step in and buy it real cheap to take care of the debts then turn around and sell retail recouping my part plus a share of the proceeds but thought that might get expensive with two transactions. I recommended a master lease idea where I'd come in and pay off the debts, then rent it out for a period of years. My friend and I could share the cash flow. I would of course want to be on the title to recoup my initial investment once they are ready to sell it.

Any tips or advice would be greatly appreciated.  I've read about this strategy but this would be my first time attempting it.  I do realize a real estate atty will be necessary.

Originally posted by @Rodney Sums :

A good friend of mine owns a condo free and clear. They are unfortunately way behind on HOA dues which resulted in a lien. They are also behind on property taxes. They don't have the credit or cash to do anything about it and aren't very interested in selling at a discount to an investor on the cheap. They have been living in it and had trouble selling it on the market. It has however been fully rehabbed already. The property sits at the end of a mesa with panoramic view of the city. I offered to step in and buy it real cheap to take care of the debts then turn around and sell retail recouping my part plus a share of the proceeds but thought that might get expensive with two transactions. I recommended a master lease idea where I'd come in and pay off the debts, then rent it out for a period of years. My friend and I could share the cash flow. I would of course want to be on the title to recoup my initial investment once they are ready to sell it.

Any tips or advice would be greatly appreciated.  I've read about this strategy but this would be my first time attempting it.  I do realize a real estate atty will be necessary.

They need to deal with the HOA pronto. There was something in the local paper about HOA's having an easier time foreclosing in the valley. Tell him to get a job and cut out "play things". Don't say there aren't jobs, there are a lot of unfilled positions. Or, he simply is a "don't wanter".

Either way, sounds like a recipe for disaster sharing a property with this fellow. Owned Free & Clear and not making HOA payments or paying property taxes? Not a good sign. You can make an offer based on him doing Owner Financing but as you state, you need to be on title (without him) or you'll regret it. If he is a "really good" friend, make the offer and drop the subject. Let him decide what he wants to do, if you want to keep his friendship.

Account Closed certainly the issue with the HOA is of high concern as well as the taxes. I would certainly do my due diligence to ensure the HOA is paid, continues to be paid, and hasn't begun any foreclosure if I proceed with a master lease. The objective is to take over in the owner's place so things like this don't happen again and earn a return on my investment for satisfying these debts and managing the property. This friend has issues bigger than getting a job. Their situation is where the opportunity presents itself as an investor.

However I do see your point in the strategy of doing owner financing instead.