Master Lease and Option

There is an ancient Chinese curse:

May you live in interesting times.

In these interesting times of economic uncertainty, highly leveraged loans are coming due on multi-family income properties and many of these properties cannot qualify for institutional new financing. Owners are forced to sell, because they cannot obtain cost-effective refinancing. The qualifying for a refinance loan depends greatly on the property performance. Also, the available maximum Loan to Value (LTV) in today’s market may not be enough to pay off the existing debt.

Many property owners choose to sell for various reasons. If your reason is urgent or an emergency, then I believe that you may need to consider a drastic reduction in the asking price in exchange for closing quickly with all cash. If that is your situation, then I may be able to arrange that.

However, if you have time to wait for a delayed sale at a fair price and you will consider teaming up with a potential buyer who can invest their own resources into improving the property and its performance, then I may be able to help you.

What if I could simplify your situation by becoming your single master tenant by taking over the property management? I would also lock-in a fair purchase price for you and to give me time to arrange for financing to buy the property after I renovate the property and improve the property performance. By the way, I prefer working with properties that need renovations and improving managerial efficiency.

I often hear from property management companies complaining that the owner is unable or unwilling to renovate the property, which causes tenants to leave and thus loses income. It’s a downward spiral of less income which means fewer repairs which means fewer tenants and less income. The owner loses all equity and gives back the property to the bank.

I assure you that most property management companies won’t offer to invest their own resources to renovate your property. In my case, my intent is to buy the property at a locked-in fair price after I improve its performance. I will oversee the property operations to be sure that my investment is protected.

I will have a strong incentive in successfully closing the purchase. If I don’t close the purchase within the agreed timeframe, then you would keep all of the property improvements, the increased value, and its increased cash flow. Either way, you are protected. Would that kind of arrangement interest you?

I can arrange a delayed purchase with a Master Lease and Option (MLO) on your entire property. You continue to receive income (after deducting operating expenses) for servicing the debt and to receive net cash flow, but without any of the current marketing, management expenses or responsibility.

You will only deal with one single tenant, the ‘Master Tenant’. We call this the ‘Perfect Tenant’ solution.

You will continue to claim property depreciation and all of the tax benefits, because you remain the owner on title. You have just one tenant (the ‘Perfect Tenant’) and no property management hassles.

With this program, I address owners who are seeking to transition from an active management position to a passive form of ownership without any management responsibilities.

By improving the property performance, I am repositioning the property to afford refinancing or eventual sale as a quality stabilized income property.

Our ‘Perfect Tenant’ program is aimed at properties that may be experiencing increasing or current high vacancies, declining rental rates, difficult tenants, and rising operating expenses. Today, banks are more cautious than ever before to provide financing for distressed properties.

Let me help with my ‘Perfect Tenant’ program.

Here are just a few of the benefits for you with the ‘Perfect Tenant’ program:

  • You continue to receive income (after deducting operating expenses) to service the debt and to receive net cash flow.
  • The Master Lease Agreement (MLA) is a cash flow instrument that can be hypothecated (pledged) as collateral for a loan. You can get a loan for a lump sum of cash without further encumbering the property. You can also choose to sell the MLA for a lump sum, while retaining ownership of the property.
  • If you need an IRC 1031 tax-deferred exchange, the Master Lease and Option (MLO) solution lets you “dispose” of the property now and gives you plenty of time to find a replacement property. You can even arrange for a double closing on the same day to sell your property to us and to buy the replacement property. You won’t worry about the strict IRS regulations for the limited number of days to identify a replacement property and to close the purchase.
  • If you have already sold a property in an IRC 1031 exchange and are now searching for a replacement property, then let us help you to meet the strict deadline to preserve your capital gains. The clock is ticking!
  • If you have pulled out cash through refinancing above your adjusted tax basis, an immediate sale may have adverse capital gains tax consequences. You would not be eligible to shelter the tax through an IRC 1031 exchange or an installment sale. If your intent is to pass the equity gain to your heirs on a stepped-up basis, then our Perfect Tenant solution may be just right for you. The delayed sale may be deferred until your estate is ready to pass to your heirs.
  • The sale transaction is pre-arranged with a title company, so at conclusion of the lease the closing is quick and efficient.
  • You are dealing directly with us without paying a real estate broker commission.
  • I am a professional asset manager. I retain the services of well-qualified property managers, contractors, accountants, and attorneys. I supervise my professionals to handle all of the daily operations, and I provide regular asset management reports.
  • Without the burden of daily management, you have the freedom to focus your time on pursuing other opportunities.
  • Property maintenance is already included in the property operating expense.
  • You still get the tax benefits of ownership, as well as deferring capital gains until the purchase option is exercised and the property is sold.
  • If the purchase option expires, then you get back the property with its improved cash flow and performance.

Contact us today to discuss how you can benefit from our ‘Perfect Tenant’ program with the Master Lease and Option (MLO). Click here to go to our support page to submit your inquiry.

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