Fixed Master Lease Questions

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  • Hello,

    I recently got a call back from one of the letters I sent out to an out-of-state owner, who was not ready to sell their 3b/2.5b townhouse yet, but was interested in ” … guaranteed monthly rent, no vacancy, & take care of most of the expenses.

    Her tenant is vacating on Oct. 1st and the current rent is $2800.

    The property is free and clear with the following expenses:
    Insurance – ?
    Property Tax -585
    HOA – 656
    Chimney cleaning every 5 years – ?
    Dryer vent cleaning -?
    Utilities are billed to the tenant

    My questions are:
    1. Is there a rule of thumb with regards to what % the owner receives on a fixed master lease?
    2. How are the maintenance, expenses and improvements (updating kitchen/bathroom) paid for? Are they taken from the rents collected or would the owner need to be responsible for that?
    3. How many years should a fixed master lease go for, at minimum?
    4. Where I can find the funding, to pay the fixed rent I would owe to the owner?

    Thank you,

    HI Allen

    If you’re new to master leasing, you should definitely NOT do a fixed master lease… especially not with rent that high!

    Funding to pay the owner rent should come exclusively from the tenant. That’s why a performance lease is much better. With a performance lease, If you collect rent, you pay the owner. If the house is vacant, you don’t make anything but you also don’t owe anything.

    I suggest that you study the entire section on Master Leasing before you sign a master lease!! Just because someone will sign a master lease agreement, it does not mean you want the deal.

    The training will answer all your questions and much more

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