All Forum Posts by: Brian Gibbons

Search master lease option and get the basics

@Derrick Ogert

Derrick

@Rick H.

@Lydia Hughes

Search here

http://www.biggerpockets.com/search?utf8=%E2%9C%93...

I would search here in BiggerPockets about "master lease options" where you guarantee to the seller a minimum NOI or net operating income as a master tenant, then create new leases

Get an option to buy based on that NOI

And manage that property with great property management and increase the NOI by raising rents and making expenses decrease

Good luck

I would check with an RMLO or registered mortgage loan originator, 

ask for Terry lewis at www.sellerfinanceconsultants.com

Hi @Foster Algier

I would get advice from a registered mortgage loan originator, I would try Terry Lewis RMLO at www.sellerfinanceconsultants.com

MLO Master Lease Option, instead, based on the NOI.

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Do Not Buy an apartment building when you can RENT one
Use a Master Lease to control the property.
Use a Master Lease to control the property, with an option to purchase it at an agreed upon price for a few years. You then sublease to the existing and new tenants for cash flow.

There are four main advantages

1. Less Money Down out of Pocket
Not 25-30% down payments, which is quite a big chunk.
2. Cheaper Than Hard Money
Using a master lease instead of a loan may result in a lower payment than the equivalent  loan at a high interest rate or points.
3. Less Money At Risk
Your option money may be as little as 5-10% of the option price. On a $2 million purchase, that’s $100,000 to $200,000, significantly less than if you purchased it with a loan.

If the deal goes bad, you don’t have to exercise the option, so your downside risk is limited to your option money, time, and improvement costs.

4. No Debt Financed Income Tax on IRA Investments

Income from that investment may be subject to unrelated debt financing income tax (UDFI). A Master Lease is not a loan (as long as the master lease is not long term with a declining balance, thus a disguised lease), the net income to your IRA is not subject to debt financed income tax.

Negatives

Taxes: When you exercise your option to buy and simultaneously flip the building, you haven’t been in title long enough to qualify for a long-term capital gains tax treatment. 

Thus, the gains from the sale may be taxed at a higher rate.

The Seller:  The seller could simply renege on the deal when it comes time to exercise your option, leaving you with an expensive litigation option.   Secondly, the seller may end up in bankruptcy or get a lien against the property in the interim. Third, the seller may die or disappear, leaving you with a legal mess that will take time to clean up.

See a great lawyer with experience with MLOs.

@John Hamilton

Florida is cracking down on people brokering paperwork as if they are OWNERs, and they not on title.  Ohio and California too.  

Advertising residential property with pictures, not citing they are selling an agreement.  

Wholesalers telling sellers they have CASH BUYERS-INVESTORS and not closing if their so called "cash investor" does not buy, wasting 3+ precious months of summer marketing time.

Now don't get me wrong, 

Agents that take a listing (buying a listing) and not being straight with the owner about pricing the property as per SOLD COMPS are hurting sellers too.  Property does not get sold.  But that is not the issue in this thread.

Get licensed and act as a principal, disclose you are not acting as a fiduciary agent, and give the seller an offer.

 For ANYONE in California that is licensed, and is getting LIP from a broker not liking your wholesaling marketing, see this attorney, who was a RE broker for 10 years before going to law school, practices  in Long Beach, Paul Samarin JD

http://www.realestateclubla.com/educational-tools/...

He should be able help squash your political broker problem.

"Watch the crowd, Go in the opposite direction."

@James Leonard

Welcome to the land of UVA, my favorite NCAA Div 1 lacrosse college!

Lease Options are rarely advertised for, and if they are, they are from investors, not sellers.

Here is a thread on "How to do terms Deals"

I talk about negotiating with sellers, and marketing for deals.

Best of luck in land of Cavaliers!