Property Management Vs Master Lease for the investor

4 Replies

I have a property management company but I am leaning toward converting my clients to Master Leases. I have seen it done it another state.

My reasoning is property management is set up for the management company and not always does it benefit the investor, especially if they reside out of state.  I am an investor at heart and I am trying to look at it from an owner /investor point of view.  I know there are many good property management groups, but if that management company has its own properties it is hard for me to see how they stay loyal to the investor.

It seems it would work for C grade properties the best. I have some units in areas where there is a lot of demand put on the property management company just because of the area that the property is located in and the clientele it draws.

I will not utilize the lease option to purchase for that is not the goal and it causes many issues with the owner/investor. I am going to test it starting in November on a 4-plex.

Thoughts experiences with this?


@Rodney Campbell I'm a little confused from your question. 

You want to convert your management agreement to a lease option but not invoke the purchase option so YOU as the PM will better align YOUR interest for your client?

In my experience, master lease options are for owners that agree to let a buyer turn a property around so it will be eligible for higher funding and then the purchase option is used to complete the transaction.  I've never seen a PM trying to make the argument of you're making. 

What is it that you think a master lease option will provide YOU as PM that your management agreement doesn't?

Joseph Gozlan,

Thank for your response.

I understand it is a little different than usual.  MY goal is to minimize the conversations/hassles with the investor.

For me an investment should be hassle free and with the Master Lease I control the property.  I can guarantee the investor a fixed amount for the entire year.  They get a good return and know exactly what the investment will return that is no touch no work for them.  The advantage for me is that I will have that property for a year and with only one person in charge of the decision making process I can improve the investment and return.  It makes it easier for me to keep the properties full and reduce the headaches for the investor and my staff.  

The reason I do not utilize the purchase option is that I don't really want the property and most investors wont enter in to that type of arrangement.  It becomes to litigious.

I like to take on properties and keep them.  The more I have the easier it gets.  When you us  the current PM way most multi-family C & D properties under preform and are a management nightmare.  The investor suffers because the property is never full and constant maintenance costs evictions fees...etc; associated with the turnover.  Sometimes the PM company is making money by the constant turnover, but I do not like that business model.

The one I am doing now the investor will make more money than last year.  I will beat my PM management percentage and not have any run ins or negative issues with the investor.  The investor will get a guaranteed monthly amount. 

For me treating the investor like I would like to be treated and offering a solution that works for both is my goal. For the properties that I specialize in this is a way to set me apart from other PM's and keep properties long term.

This may not be for everyone but if you have had the experience of being an investor held hostage by the PM company's and your "challenged" property in under preforming this is an option. 

Rodney, how did it go rolling out the master leasing last year? 

I am a big fan of the concept and  am rolling this out now in Charlotte, NC.  I am also moving away from traditional property management and see the value for me and the investor client.  

Interesting thread... I'm doing the exact opposite. I was set on a Master Lease, but because I had a back end company ready to guarantee me a 3 year lease, I actually had to abandon that model.  The company giving the 3 year lease specifically only wanted to work direct with the owner OR a management company. Therefore, in order to take advantage of the setup, I essentially HAD to go the PM route.  Either way, the client benefits, because I'm able to guarantee 100% occupancy for 3 years. 

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here