First Deal: Short Term Rental via Master Lease

17 Replies

So, tomorrow I sign the contract for my first deal.  It is a Short Term Rental via Master Lease.  Tonight, I'm getting cold feet.  Did I do enough due diligence?  What if the cost of the unknowns outweigh the profit and the knowledge gained?

At the moment, I am most concerned about my blind spots related to furnishing the place and marketing.  Any advice to help me get this started will be greatly appreciated.


@Yolanda Columbus I've never heard of a Master Lease. Can you explain briefly? I'm also Google'n it as well. Seems like a lease the sub lease set up, aka sandwich lease.

Congrats. Good luck with everything. You'll do just fine.

It sounds like you are leasing a property (for 12 months?) and then you plan to furnish it and rent it out for a STR. You don't know about furnishing or marketing the property, but today you are signing a lease?

RUN AWAY! Don't do it. You should already be knowledgeable about furnishing and marketing before you sign a lease.  What is your target market in Duncanville TX?  Vacation goers, refinery workers, students, retirees?  You need to know who you are renting to and what they want before you sign a lease.  You also need to determine if there is  sufficient demand for what you are offering for it to be profitable for you.  You also need to determine what your competition is like and how big they are.

I have 22 STR's in this town. Every 12 months someone comes along and tries to do what I do. They start with one or two houses. When that new person enters into what I am doing, I change my focus from "Renting out houses" to "Putting them out of business". I've put 4 people out of business and was a contributing factor to cause a motel owner and an RV park owner with cabins to sell their property. Someone else in Duncanville TX will do that to you.

@Yolanda Columbus , I'd suggest don't listen to @Paul Sandhu . I barely knew what I was doing when I started with my business partner. You don't need to be an expert in furnishing and marketing before you sign a lease. 

Maybe I'm naive, or my units suck, but I furnished my first unit in about four days, built everything by hand, bought everything myself. Maybe not the most efficient but I got it done without much issues and it looked nice and became my best performing unit.

I guess it depends on how big your area is. As Paul said, if youre in a small area there is definitely someone who may be able to run you out of business.

Luckily I live in a place where there is plenty of space for competition.

The "worst case" scenario is you lose 12 months of rent, and now you have some furniture. Better than getting a house repossessed by the bank because you defaulted on your mortgage.

@Paul Sandhu you just admitted to a textbook practice of predatory pricing which is illegal. See the famous Utah Pie Co. v. Continental Baking Co. I would be more careful what you say in public forums.

@Paul Sandhu

Thank you for taking the time to reply.  However, you have misinterpreted a few words.  So, I choose to ignore your advice because its not based on the facts.  In my post, I mentioned "blind spots".  Blind spots are those things that you don't know you don't know.  Hence, you reach out to others for insight.  This does not mean "I know nothing."  Second, you assumed my property is in Duncanville.  My property might be in your backyard.

You have systems, relationships, and infrastructures in place that I do not.  Those are both a blessing and a curse.  It means that I can be more flexible and innovative.  You are the cruise liner.  I can either be the speed boat or the pirate.  I have that flexibility.  You are tied to your practices.  I say that to say I am not fearful of Goliath.  However, Goliath should be fearful of me.

Happy Thursday


@Dexter Crawford and @Andrew Wong   Thank you both for your encouragement.  At this moment in my adventure, I realize I have been stuck in Analysis Paralysis.  So, I'm moving forward.

The Master Lease is similar to the Sandwich Lease.  David Tilney is an expert on the Master Lease.  I believed the differences are in the details - duration, protections, etc.


@Yolanda Columbus some of these comments are "aggressive"... So allow me to play mediator and/or "Devil's Advocate", if you don't mind... While I'm not a fan of the perceived tone, @Paul Sandhu has some points that I would not necessarily overlook.  A milder version of what he said, that should be considered, is that you should build your demand BEFORE adding inventory, and if possible, also "test" the market before going all the way in.  If you are nervous, there IS a slight chance that you are ill-prepared. 

I have no clue what @Steve B. is referring to as to identifying "predatory pricing". Steve, I'd love to hear more

I admire @Andrew Wong method, but for some, it could be risky and time consuming. Success using that method will depend on one'e ability to be hands on. Or, you can always creatively resolve and mitigate risk by aligning yourself with various supporting businesses and having lots of capital to throw at certain issues that will arise.

Just an FYI, although I was/am unfamiliar with the technical term "Master Lease", I've been doing this for 4 years here in Chicago, I have 2 homes that I own (mortgaged) and a 3rd apartment I "control" via a Sub/Sub-lease set up. The owner of the building, I plan to have a discussion with him at the top of the year about implementing a legal agreement that will allow me to control 1/3 of the building's units. This is why I inquired about the technical term, because that will help with researching the best way to structure the negotiation. Over the years, I've fine-tuned my business and have gotten away from vacation rental all together. I converted over to Corporate Housing. Same STR concept, but my minimum stay is 30 nights, also referred to as "long shorts (STR)".

@Dexter Crawford , it's nto to say that I'm still hands on right now. I feel it is very important to know the ins and outs of your business before out sourcing, else how do you know that the people you've outsourced to are doing a good job?

I cleaned my first few turn overs before hiring cleaners. Did my own laundry before figuring out a good cadence to hire launderers. Now I hire builders and movers, and have someone managing the move in.

@Andrew Wong You have a very valid point. I progressed the same way as well. I wasn't implying that one way is better than the other. I was more so saying that whatever decision that is made, is made with the consideration of one's available resources, of which the most important are time, money, experience, and supporting staff (even if that's just a friend of family in close proximity of the property).

@Steve B. You have my interest. How am I practicing predatory pricing? I never mentioned anything about prices or rental amounts. I did say I put people out of business. In my niche of STRs, people rent the first place they hear about. I make sure my future renters know about my rentals before they even know that they are coming to this town to work. My previous competition did not.

I don't understand why you need to put people out of business...we have competition in my area, but instead of focusing on putting people out of business, I simply make sure that my STRs offer a quality guest experience and use the competition to make myself better.  There are plenty of STRs to go around (a rising tide lifts all boats).  The people that aren't cut out for the business will fold on their own, without your help. 

Hopefully you have done your due diligence and can handle the worst case scenario. It is very easy to buy furniture, and if you have time you can even do so pretty cheaply (estate sales, Craigslist, clearance items at big box stores). Start by pricing your STR lower than the competition to build up a good reputation and be open and communicative with your guests. Ask them privately for honest feedback, go out of your way to ensure they have a good experience in their town. Check the forums for tips on how to start, and there are also some good podcasts out there that target specifically STRs. If you have any specific questions, feel free to send me a private message!

What is the point of waking up to put other people out of business? Sounds awful. That's literally the exact opposite of why BP exists. Of you have 4 gas stations on the same corner, one might not make it, I get it. But even Coke and Pepsi co-exist, Will there be competition in markets? Yes. Is Kiyosaki trying to put Cardone out of business because they each might own property in Houston, for example? No.

Originally posted by @Yolanda Columbus :

So, tomorrow I sign the contract for my first deal.  It is a Short Term Rental via Master Lease.  Tonight, I'm getting cold feet.  Did I do enough due diligence?  What if the cost of the unknowns outweigh the profit and the knowledge gained?

At the moment, I am most concerned about my blind spots related to furnishing the place and marketing.  Any advice to help me get this started will be greatly appreciated.


Glad to read that you decided to go through with it. Welcome to the game!

Since this thread kind of went down a bit of a rabbit hole, let me attempt to swing back to your original questions.

When first starting out, my recommendation would be to hit up Craigslist for furnishings.
Maybe not mattresses, or at least be sure to check them well for bed bugs. Speaking of mattresses, I just learned that you can replace junk sofa bed mattresses with memory foam for about $100 at Amazon. But back to CL...
You can find a ton of great furniture, quickly, at cheap prices on CL. If you get something you're not 100% on, it's still probably good enough to get you started. Don't let the analysis paralysis set in here too. Get it furnished and rented quickly, then you can upgrade when you realize some profits (which hopefully won't take long).

As for marketing, depending upon location either VRBO or AirBNB is going to work better for you. So do both.
But don't bother with other listing sites. At least not yet. Play with these later if you like, but you'll likely find they are (literally) more trouble than they are worth.
Have good photos, furnished. Put at least two dozen of them in your listing. Take these yourself now, even with a cell phone. Add professional photos later (again, after you see some profit).
And write a good headline, description, and about me section. Look at your successful competition for ideas around these.
Finally, also look to your successful competition for pricing, then undercut them by 10-20%.
You are initially at a serious disadvantage from your established competition, in that you have no reviews. You'll want to cultivate these quickly by asking for them from your guests at the end of each stay. Once you've built up double digit 5 star reviews, you can match the prices of your successful competition.

Good luck!

@Garry C.  

@Yolanda Columbus

My concern would be what liability protections are taken for the actual owner of the property?  We all know if there are any accidents the owner of the property will be named in any lawsuit.  While AirBNB and the such provide liability protections, I would doubt the owner is covered as they are not part of the transaction

What protections are in place for the actual owner in regards to violations with the city, HOA and other municipalities? Any violations could eventually become liens on the property

Do you disclose this to the owner?  In Texas this would not be permissible with a TAR or TAA lease

@Steve B.

That case dealt with other companies colluding to put the local guy out of business by price fixing.  Why couldn't one company try to take another's market share ?  Happens all the time.  

@Dexter Crawford   Thank you for reframing the "aggressive suggestions".  I'll take your suggestions in to consideration as I move forward

@Jenessa NeSmith   Thanks for your suggestions about furniture and pricing.  I've been combing through craiglists.  I have a budget in mind and I've reviewed my competitors.  I know functional items needed.  My tendency is to choose big items based on price and smaller items based on style.  At the moment, that approach is bringing up a hodge-podge of nothingness. ???

@Garry C.   Thanks. I feel like I'm on the right track.  The suggestions from experienced investors like yourself are starting to overlap.  So, perhaps my blind spots are not as big as I feared.

@Greg H.   Great question.  I believe this policy, covers your concerns about liabilities.  Yes, I disclosed it to the owner.  No it is not a TAR or TAA lease.

First deal.  If nothing else, I'll learn a great deal.  I've done enough due diligence to make sure we will not go bankrupt behind this deal so..

Thanks everyone for your responses.


It depends on how much money you have up front to work with! With my first Airbnb, we focused on price point for the furniture and got neutral (boring!) pieces as cheaply as possible.  As our Airbnb got successful, we picked a theme/color scheme and began using the money we generated to update our furniture and appliances slowly.  As our furniture and appliances got nicer, we could (obviously) charge more.  

Craigslist free is the best!! We've gotten all of our mattresses/box springs for free (I know some people think that's gross, but really every mattress you sleep on in an Airbnb/hotel is used - just test it out to make sure it's comfy and check for bed bugs) couches, night stands, kitchen table/chairs...if you have a truck, a lot of people will let you take stuff for free because they  don't want to deal with hauling it away.  It may be a bit hodge podge but if you stick to neutral colors it will end up looking alright! 

and then the property owner stood me up.... Well, on to the next lead.

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