Master Lease Agreement - Completely Foreign?

Question

I've been sending out lots of direct mail, to owners of apartments and retail centers, offering the master lease agreement with purchase option.  I've actually gotten a good bit of calls back from the mailings, mostly saying that they were "intrigued" by the concept and wanted to know more about it.  Some of them seem very interested but then things just go silent.

In other cases, I've pitched the offer for master lease, via agent/broker, and they call me a bit confused.  My own broker says that in 30 years of being a real estate broker, she's never heard of this being done.  So my question here to all of you is...

As much as Peter Harris and other well-known investors, that claim the master lease agreement is their "favorite creative financing tool", does it really work for anyone?

I love the concept and have gotten pretty good at pitching it, sharing all the great benefits to the seller, etc. and many people seem "intrigued" but then like I said, it just ultimately goes nowhere.

Brian Gibbons · Answer

well I've done many master lease arrangements since 1985 or so but it's how are you sell it

Motivated sellers will listen to a cash or terms offer

You don't so over the phone and you don't sell with your marketing piece, you get the appointment and you talk to the seller in person, the yellow letter approach I don't think works well with creative terms as far as selling your idea, you want to set the appointment and show them the cost to solve an agent versus renting it out versus some creative solution

Benjamin Pekarek · Answer

Marty,

Tried it here in Sarasota back in '12 and '13 when we hit a local slump. Got a lot of interest back from the 1,000+ people I sent it to, but never once did I get a property under my control. The closest I got was a triplex. They were ready to go, but their expectations were too high, and the margins were too thin. I believe it's an excellent strategy, but it won't work unless you have a desperate person trying to get out of a property, quickly, and they're willing to make the kind of money you need to get it done. Otherwise, they'll find anybody other than you to work with!

Marty True · Answer

Hey Benjamin,

Thanks for the reply.  Not what I was hoping to hear but it's good to get some real investor stories on which of these strategies really work.  The books and podcasts by some of the "pros" that talk so highly about creative financing and specifically the master lease, make it sound so great and easy but it really does sound completely foreign to most people that I've talked to about it.  Funny thing is, they ALL say how creative and interesting it is but nobody bites in the end.

Thanks again for the reply and the insight!

Marty