Master Lease Agreement

5 Replies

I have heard and understand the basic idea behind the Master Lease Agreement, but for some reason was never able to visualize the picture. I have a property in mind that would be the ideal scenario to use the MLA, just looking for some advice/tips as how to structure it the best way. 

The situation is where the seller couldn't sell before the end of a loan term so had to refinance, and the loan carries a PPP. I know he wants to sell but is locked into the new loan. 

I was thinking to propose that we lock into a purchase option price for when the the PPP goes away, and in the meantime I send him rental payments each month equal to the mortgage (maybe a drop more). 

Does that make sense? Or better to put down some type of down payment? What other kinks should I be aware of? Should I have part of each monthly payment go towards paying down the purchase price (so at least there's some equity by the time that comes around)? 

The investment property is located in Cincinnati, Ohio and is a multi-family investment, trying to utilize creative financing (trying to plug in keywords that people would see). 

Thanks in advance! 

@Joe Fairless  @Brandon Turner @Ankit Duggal




What's he willing to accept? How distressed and sick of managing is he? How are you determining your exit price offer?

Originally posted by @Taylor L. :

What's he willing to accept? How distressed and sick of managing is he? How are you determining your exit price offer?

I was determining the exit price as follows: 

He was looking for a certain price, so I'll give him 25% of that up front as a down payment. Will pay him every month for 5 years to cover his mortgage (until he no longer has a PPP), but with the principle paydown going towards the final price. So after 5 years, when exercising the option, I'd pay the remaining 75% minus the principle paydown over the 5 years. 

Does that make sense? 



 

Originally posted by @Colby Merrill :

@Heshel Mangel

I highly recommended watching a video on YouTube titled Master Least Agreement for Commercial Real Estate by Commercial Property Advisor. He goes into good detail of the ins and outs of it all.

I've watched that video. I've watched just about all of Peter Harris videos. He mentions that with the monthly payment, you increase your equity when executing the option. This would only be true, if you have the monthly payment going towards your purchase price (you minus from the original PP all the principle paydown that occurred during the option period). 

Is that not correct? 

What's the incentive for the seller during the option period if all the mortgage payments and loan paydown is coming off the money he'll end up getting?