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I’m negotiating to master lease a duplex from the landlord in a great neighborhood. I’m writing him up three offers: performance master lease, fixed master lease, owner finance sale. I don’t think he’s ready to do a sale yet so master lease seems to be the best option. However, he keeps telling me he doesn’t like the idea of the master lease because then he doesn’t have any control over the subtenant. His reasoning is that should I fail to fulfill my duties then he will have to evict subtenant. I’m trying to include language in my lease that reassures him of this eventuality, basically giving him the right to cancel/annul any of my subleases should I default on the master lease, but I’d like to solicit CFD members on what language they would use in the lease or in negotiations. Thanks, Jeff
HI Jeff
Do not mention the word master lease. Tell the landlord you will rent the property, then discuss all the benefits to him .
Verbally, tell the landlord what you can pay per month if you lease the house – tell them they will get their money every month even if the house is vacant. Of course you should tell them that you will be subleasing it to your tenant.
If the owner wants to see the credit report of your sub tenant to help in the selection, let him. Don’t be afraid to do this.
Then, verbally tell the landlord how they can make a little more if you only pay them rent when you collect rent – they will get a certain percentage of the lease money you collect (perform. Discuss what that percentage would be.
TALK to the landlord. Discuss the pros and cons of each offer. Let them pick the offer they like best. Get everything agreed to verbally, then draw up the lease agreement. A face-to-face meeting is usually more productive than a talk over the phone.
Do not confuse the landlord with an offer to buy unless they have indicated that they want to sell. If they do want to sell, you could skip the master lease offer then go straight to a buy offer.
Thanks Jackie. I have been avoiding using the term master lease but he flat out asked me if what I intend to do is a sublease so I said yes. We have a pretty good rapport and he definitely is feeling the pinch of a six-month vacancy. We were supposed to meet last week but he had to cancel and he asked me to draw up a proposal for him instead. The reason why was going to throw in the owner finance offer is because he keeps bringing up selling “at some point”. However, I do see your point that bringing three offers to the table might make the situation worse rather than better. I’ll call and try to get another face-to-face appointment. The good thing is that time is on my side.
You need to meet with the landlord.
tell him, there are two ways I can solve your problem
way 1 – I will lease your house for $X, you’ll get a guaranteed payment every month even if the house is vacant Let’s prorate the February rent. I can pay you today.
way 2 – I will lease your house to my tenant than pay you __% of all the rent I collect, when I collect rent. I’m ready to start marketing your property to find the very best tenant. I will pick up all the marketing expenses.
which solution is best for you mr. landlord?
if he says, I’m concerned about who you put in the property – say let’s select them together. I will send you all credit applications then we can discuss and go with the tenant you like best
Remind him of the legal benefits of you renting the house versus hiring a property manager. If the property manager screws up — the fault gets passed on to the landlord. But by renting to you, the problems all fall on your shoulders so you want to make sure everything is done correctly.
think of what other objections he can come up with – have an answer ready to go.
watch the Master Lease training in the Premium Member section – you will get TONS of ideas to answer any objections that come up.
Thanks Again, Jackie.Good advice as usual. I’m finding that when I speak to landlords all too often they act “ashamed”Or embarrassed that the vacancy has gone on for so long. It’s a delicate dance to get them to understand what advantages I can bring to the table. I will definitely review the training section and glean what gems I can. Thanks, Jeff
Mike,
from what I can see, it seems to me that it is a marketing issue coupled with too high a price for the rental. There are a lot of vacancies in my city throughout the good areas of town where landlords are trying to command a rental price too high for the market. This landlord is asking 2.5 K for the top half of his duplex and doesn’t have a firm price for the bottom half. Additionally, his marketing is limited to a rusty sign in the front yard and one website (Zillow). I have a fairly long list of potential tenants and I think creating a few social media posts and even hosting an open house would get the right tenant into the place. At the right price, of course.
I do see a lot of potential for master leases in my town since the vacancy rate seems to be growing with the landlords asking very high rents. We will see.
JeffHI Jeff
It sounds like you do have a lot of opportunity to do master leasing in your town – if the landlords get realistic about their price.
You should show them how much they net net with you versus how much they net net with a 6 month vacancy. Even at a lower rent, they will net more with you. Many people are visual learners so you need to have this written down.If this landlord has 2 vacancies, maybe you could help him fill one with a great tenant then he will master lease the other.
You might even consider doing a Highest Bidder Sale for the RENT. I’ve done this before and it works great. Get tenants fighting over who will pay the most rent (qualified tenants of course). Once the landlord sees how many potential tenants you attract, he will gladly turn over his other property to you… and so will other landlords.
You will crack the code! You’re almost there!
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