Can you use Master lease option or sandwich lease option for student housing?

7 Replies

After a previous post some of the individuals that took part In the conversation about some creative ways to fund properties. Two methods that stood out to me were master lease and sandwich lease option. I wanted to use those methods for student housing rentals in the Charlotte area. I would love to team up with a local experienced investor of these options in the Charlotte, North Carolina area. But if you have any advice fill free to leave a comment

For single sfrs you could buy on terms subject to and a note for equity or a wraparound mortgage or a purchase money mortgage in North Carolina

If you're going investor to investor there is no Dodd Frank to worry about, only if the person in the house is an owner occupant

If it's a multi or small apartments, having the cellar carry back paper is common

On a master lease option, you're guaranteeing net operating income or noi 

Search here at BiggerPockets for MLOs with  apartments

To clarify, you may obtain an option to buy, but looking at students to buy an another option is barking up the wrong tree, most are broke! Getting into a chain of options can open the doors quickly to trouble, I don't suggest it with individuals owning a property. Your buyer want to buy, you seller died, the estate must be cleared and you can't perform with your buyer, that can be trouble. A number of issues can arise where your seller can't perform and that leaves you holding the bag! Sub-letting is fine. :)

@Bill Gulley

 thanks for the info, from my understanding the master lease option allowed to lease out the property to tenants than keep whatever excess cash you have after you have paid expenses. So I wanted to rent a property out to local college students. 

Originally posted by Account Closed:

@Bill Gulley

 thanks for the info, from my understanding the master lease option allowed to lease out the property to tenants than keep whatever excess cash you have after you have paid expenses. So I wanted to rent a property out to local college students. 

Yes, as Brian mentioned, you guarantee the owner's NOI, or a base rent and the idea is then to increase your income above that through good management, forcing appreciation. You increase the value establishing equity for your option to purchase later on.

Where many go wrong is trying to give another buyer an option after yours, mentioned above. Leasing to students can be a good....great target market for this tactic. :)

@Bill Gulley yea I was looking for single family homes close to the school with a mortgage payment of around 850 dollars with atleast 4 bedrooms. The average rent per room is 550 so that what I would charge thag an hopefully after expenses I can walk away with around 500 dollars per month.

Originally posted by Account Closed:

@Bill Gulley yea I was looking for single family homes close to the school with a mortgage payment of around 850 dollars with atleast 4 bedrooms. The average rent per room is 550 so that what I would charge thag an hopefully after expenses I can walk away with around 500 dollars per month.

 Not to get off topic, but check you local ordinances about renting to unrelated parties. Many areas adopt a rule of not more than 3 unrelated tenants per dwelling. :)

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