Master Lease / Sandwich Lease

6 Replies

Whats to stop someone from master leasing (different from master lease option) properties from homeowners and subletting/leasing them to renters? In effect, becoming property managers without needing a real estate license and broker, which would allow them to not pay all the fees that come along with living in a state that require any Property Manager to have a RE license and broker to join the profession?

Seems someone could make a master lease stating the homeowner receives 92% of rent collected and keep the 8% without paying RE license and broker fees.

Also, they would earn more money as it would not be W-2 income, as most property managers earn currently.

Because the person creating the master lease would not have to pay RE/ Broker fees, they could give lower the fees to the homeowner or give better monetary incentives to the homeowner to master lease, as apposed to going with a licensed PM.

For example, if a property manager is at 10% fee with 100% of first months rent going to the PM, a master lessor could easily do 8% "fee" with no first months rent going to the PM company because they don't have RE/broker expenses or percentages they need to pay out.

Has anyone seen or experienced this? What are the pitfalls?

Thanks for reading!

@Rob White If you aren't a licensed real estate agent, it's illegal to manage properties that you don't own.

Also, that would only work if the seller will allow you to sublet, unless you tell them up front what you plan on doing - they or their lawyer will notice the sublet clause isn't in the lease.

Yes, the owner of the property would be enformed exactly how the master lease would work and that it would be subsiquently sublet. 

Just curious about all this because from what I've heard, you don't need to have a RE license to sublet proporties or execute a master lease.

Well it sounds a lot like a sandwich lease option.. You need a license for those. Maybe someone can come in and expand on this a bit as I am not familiar with master leases.

You can act as a principal buyer - lessee and be licensed in HI.

Good HI article from Broker and Agency Law

Legal link - Disclosure of Agency

Get a HI License and see a senior real estate attorney about your master lease idea.

I like master leases and master lease options.  You need financial reserves to do them though.

In Texas, Sandwiches are not a good idea due to Fee Simple Title.


Thank you guys very much for the input! Starting up my RE license course soon. Great perspectives to expand the research.

I just got back from a REIA meeting where a guru was singing the praises of a sandwich lease. Does anyone know if a RE license is required to do a sandwich lease in CA? This is all assuming the property owner is OK with such an arrangement.

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