Master Leasing to Seller Finance

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  • Hello,
    I have this duplex that I’m not sure would be a good property to buy with seller finance. I was thinking master leasing the duplex first for a certain amount time to see if the property is worth the investment as well as dealing with the current tenants and after the lease is up I would put an option if I wanted to do seller finance or walk away, Could this be done and would be better a performance lease or fixed lease I don’t have much money to make repair on the units if needed?

    Thanks,
    H

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    Is the current property owner motivated to turn management responsibilities over to a master leasing person? And if so, why?

    Is s/he keeping up with repairs on a timely basis, or has that been a problem? If a problem, is it because s/he is not management capable, or is too financially stressed to make repairs? If the latter, then the property is not a good candidate for master leasing — because the owner on title is still responsible for repair bills (at least, the major ones) — and if that’s a problem, this is not a good master leasing candidate.

    Yes, getting an option to buy is within reason — either at the initial time of your contract, or later, depending on what you can or want to negotiate. Just remember, if you pull that trigger and exercise the option, then the property repair bills instantly become yours. Until your financials rise about the “skinny” level to where you can handle property repairs (and occasional vacancy losses) comfortably, don’t exercise that option. Other good reasons not to exercise that option: If you’re in a falling market, you’re much better off to remain in the master leasing posture — so you don’t take the hit from falling property values.

    It’s very common to master lease a number of properties to build up one’s financials while keeping risk to a minimum — well before considering actual purchasing.

    Best wishes,

    –Dee

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    I was thinking of doing a performance lease for 1 year and to see what kind of tenants I would inherent and gives me time to see how bad the duplex and I don’t have to pay for big repairs and after 1 year I have the option to do a seller finance and buy the property or walk away, would be there a good idea or is there a better solution?

    Thanks,

    H.

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