Master Lease Agreement for Commercial Real Estate

Discover the power of the master lease agreement for commercial real estate. For beginners and experts alike, it allows you to control property without having to get a bank loan. It is a foundational tool for all commercial real estate investors.

Master Lease Agreement for Commercial Real Estate PodCast

Here is a summary of what you learned in the above video:

Master Lease Agreement for Commercial Real Estate

Works with all sort of commercial real estate deals
One of the most famous Master Lease Agreements was the “Empire State Building”
Someone offered 2 million a year for a 114 year master lease agreement
Payments today are still only 2 million a year but now the income is at 6 million
4 million dollar profit a year

How the Master Lease Agreement Works: (2:33)

You buy the property from the owner with a small or no deposit
At closing you get “equitable title”
Entitles you to all the cash flow, all the tax benefits, and you get all the profits at the set price
The terms are set in stone so any value increase on the property is yours to keep
The seller gets a monthly lease payment from you

Joe’s Deal (3:50)

168 unit apartment for sale
The property was in disrepair and had many vacancies
You couldn’t put a new loan on the property because there was a large penalty if the owner paid off the loan early
Joe structured a 4 year master lease deal
Seller got down payment money for a new deal and got out of a problem property
Joe paid the lease and then the seller used that money to pay the mortgage
He created 800,000 worth of equity in just one deal in a 4 year period

Two things you must do to land your first Master Lease

Get the seller motivation
Construct a deal and terms based off seller motivation

In Simpler terms: (6:55)

Seller gets:

Lease Payments that cover the mortgage
Easy Sale
Freedom from involvement
Rescued from any personal or financial issues pertaining to the property

Buyer Gets:

Purchase with little to no money down, no banks, no credit
Less risk because the loan is still in sellers name
Cash flow-any money left after lease is paid is yours to keep
Option to buy after the agreed upon years
All profits

3 Nuggets on YOU Doing a Successful Commercial Master Lease Deal (8:58)

Get the seller motivated and construct the deal based on that motivation
Unwind your mind on what a typical deal looks like
Master Lease Agreement Document

What Property/Seller is ideal for a Master Lease Deal? (9:47)

Seller that is tired and burnt out
Seller lives out of state
Seller is sick or has other personal reasons for selling
Avoid capital gains tax
Large prepay penalty on loan
Has property management problems
Vacancies over 90 days old

Conclusion (19:45)

Learn how to solve other people’s problems
The Secrets of the Millionaire Mind by T. Harv Eker
“An Entrepreneur is a person who solves other people’s problems for profit”

Share this with your Social Network!

ABOUT THE AUTHOR

Peter Harris

Peter Harris is recognized as the leading commercial real estate investing mentor. Starting out professionally as an introverted engineer, he purchased his first apartment building in 2001 with help from mentorship allowing him to quit his job. Others took notice of his lifestyle change, began asking Peter for investing guidance and thus began a life long passion for teaching how to invest in commercial real estate. Peter went on to become a best selling author, establish the most popular commercial real estate YouTube channel and mentor people from all walks of life on commercial real estate and multi family apartment investing. When not building up his own portfolio and helping others become financially free, Peter enjoys spending time with his family and serving his church.

Comments

Michael Hippolyte says September 1, 2020 at 11:29 pm

Mr Harris I have seen some of your videos on commercial property and it is very informative.Thank you for all you are doing to inform those who need guidance in that area.
I am interested in acquiring property and actually have my eyes on doing so soon.So I am thanking God for putting you in my path to teach me the wisdom I need to undertake this venture at hand.
God continuous Blessing to you and yours.

Hello Peter Is it possible to get credit or cash at closing using a MLA? Thanks

Peter Harris says August 27, 2020 at 10:17 am

Anything is possible

Hey Peter I watch on YouTube and read your book. I would like to do the protégé program I have a few commercial properties.

I’ve listened to your lessons a long time without comment amd ill have you know i am in negotiation of a Master lease agreement to acquire property to develop a 40 unit apt complex. Thx to listening to you again this morning i know to include the term Equitable Title. My question is how do i establish an equity and title search company? I have a referral and i was wondering if there is a preferred method to engage these folks? Further!, i want to keep away from my bank and the sellers mortgage holder. If i engage a title company escrow company that won’t trigger any bbn of the folks to go poking around my credit?

Peter Harris says April 9, 2020 at 10:30 am

Correct. You can hire a title company to research the title and that is not going to have any impact on your credit.

Hi Peter! Can you email me a MLA so i can look at it

Peter Harris says February 10, 2020 at 6:32 pm

The MLA I use is provided to our Protege Program participants but you can also contact a local commercial real estate attorney to create it for you.

where can I find a MLA?

Peter Harris says November 18, 2019 at 8:55 pm

The MLA I use is provided to our Protege Program participants but you can also contact a local commercial real estate attorney to create it for you.

You have a lot of info. Thanks God bless you. I need a training course information so please contact me anytime or email me.

Peter Harris says October 3, 2019 at 8:25 pm

Enroll in my free course:Commercial Real Estate Investing for Beginners

Hello Peter, I have 204 unit deal i think would be a perfect master lease scenario. How do I get my hands on a copy of your master lease agreement?

Peter Harris says October 3, 2019 at 9:44 pm

That is provided to our Protégé Program participants but you can also contact a local commercial real estate attorney to create it for you.

Hello Peter,
I am so excited that I came across your YouTube video’s. Thank you for making everything plain enough that a beginner (myself) can understand. I am still in the training and researching stage, but I know I want to use the MLA as my first legal agreement when acquiring commercial properties.

Peter…you are fantastic! You know how to teach (educate).
One small question: What happens if the Seller stops paying the mortgage after signing the MLA? Can the Lender take over the property?
James Choate

Peter Harris says June 29, 2017 at 8:26 pm

First of all, YOU should be paying the debt service directly to avoid such issues. But YES, if the lender is not paid, they can foreclose.

Hi Peter, If you only knew how much you have influence a young investor like myself. Hopefully one day I can share my story with you. Thanks a million for your advice and ability to explain complex topics. How does a master lease agreement affect the taxes of the seller. This is a question a buyer would need to know.

Peter Harris says April 19, 2017 at 8:13 pm

They are leasing the property so they are getting rental income. Any commercial owner would know the ramifications of rental income on their taxes; or they could ask their accountant.

I am having a problem…. I bought a property and it was turned into a commercial lot so I put a three thousand square ft building on to make a convenient store and across the street is low income housing and I paid for everything out of pocket now I have to get freezers for food coolers for drinks and an AC unit. Also I have to get the front paved and everything else is done. Tell me did I make the right move by spending my own money. Thanks Eldra Hughes

Hey Peter, How do you figure closing costs for MLO’s? Both when I sign the agreement with the seller and with the new tenants I bring in? Is it only when the options are executed or when both MLO agreements are signed? Is there a rule of thumb in terms of costs as a percentage of sale price option amount? Thanks a lot

Peter Harris says April 20, 2017 at 1:13 pm

There are no closing costs when the Master Lease Agreement is executed. When you exercise your option to purchase, however, closing costs will come into play. You may be able to get the seller to pay all of your closing costs at the time the option is executed. Contact a local closing company to help you better assess the closing costs for each specific deal.

hey Peter
i have much appreciation for your teachings and videos on youtube. i just signed up for the protege program hopefully i will be chosen. I currently have some money to invest with but i think instead of any other type of real estate investing i can capitalize of starting with a master lease. i would like to know where i can start my search for these types of properties.

Peter Harris says January 12, 2017 at 9:14 pm

Start on Loopnet. It’s not nearly as good as off market deals, but it’s a start.

Peter, I just wanted to say, that you are one of the best methodical and efficient speaker. You have the gift of explaining concepts in the most simplistic form. I love how you put your heart in it. I would not hesitate to by any of your products.

Where can you find this kind of contract? I looked for” Master lease agreement ” and never could find it.

Hi Peter
Where can I get a copy of the Master Lease Agreement that used by your company. Thank you for this great information.

Peter, I love your videos! They are so informative. I have a question. I have a friend whom i’ ve known for a few years. He owns a 4 plex. Can I use the master lease agreement for a 4plex? Also, the seller is very motivated and asked me if I want to buy and for me to find a way to do seller financing. He is 93 years old, very vibrant with his full mind, and has a mortgage with a big prepayment penalty. He bought the building for 725k in 2007 ( in Los Angeles, Ca). He has a balance of 425k. The rents sustain the mortgage with a little left over after the mortgage is paid. He says that he is just tired of managing it himself. He wants some money when selling. What can I do for no money down. A master lease ? Or something else? Please help. I really would love to acquire this building.

Peter,
What a great tool to use. I have a property in mind that I can now put an offer on.
I look to be in your protégé program soon.

That was very,very,very educative. Keep it up.

Hi Peter: I listened to your video on Master Lease Agreement where in you mentioned the Master Lease Agreement that your company uses. Is there any way that I could see a sample of your companies Master Lease Agreement for purchasing Commercial Apartment Buildings.

Peter Harris says September 17, 2015 at 8:23 pm

I share that with my proteges in my Protege Program

Roy Lloyd says January 11, 2017 at 3:43 am

I have watched your videos on YouTube, they are all so informative, educational and well written. I would like to know how I can get a copy of your master lease agreemenent and your LOI? Thanks Roy

I provide the Master Lease that I use to my Proteges. My LOI can be found here: Letter of Intent

Hello, my name is Jesenia Foster and I was just on youtube seeing a few videos regarding buying apartment buildings and the Master Lease Agreement. I found on craigslist a sister building of 34 units in total. I sent them an email asking them if they do Master Lease Agreements. I am in experienced in this business and would like to know what are the next steps that I should be taking. I have bad credit and need help in figuring out the next steps on this Master Lease Agreement.

peter
great video. I now a another tool in my tool box to use.
I heard of a master lease, but did’n t know how it use .
now I do
thanks again

Where can I get a copy of the Master Lease Agreement for CRE?

Peter Harris says April 7, 2015 at 7:22 pm

That is provided to our Protege Program participants but you can also contact a local commercial real estate attorney to create it for you.

James Harris says January 18, 2018 at 5:01 pm

Peter,
I am very Pleased with all of your information, first time hearing about MLA, thank God, there is a way to get into Commercial RE after all. You are so good at teaching, I understand everything you say.

Thank You Peter
You should be “Peter The Great”
Great Education

Hi Peter
Thank you so much for this informative video. I am investing mostly in single family homes but want move over to multifamily properties in South Africa. These lessons are eye opening. Thanx again!

Hi, Thank you for making these videos. How do you keep the profit from the mortgage buy-down? I have heard sooner ways to do it in residential lease options but the story of the 2m per year buy down confused me. If it’s a master lease with an option to purchase for a specific amount, then it would seem that the seller would sell at that price down the road and enjoy the increased equity. I’ll have to ‘reread my copy of commercial for dummies. Thanks again for sharing your hard earned knowledge. Ernest

Peter Harris says April 7, 2015 at 7:27 pm

It is written into our master lease agreements that any mortgage principal paydowns reduce the option purchase price by that amount.

Hi Peter, Just have one question, wouldn’t any of these types of property owners rather deal with someone who can purchase the property in all cash and give it to them in a discount, rather than structuring a master lease which the owner still has to stay in the deal until the end of the master lease, why would he want to do that if he can get out right away with a cash buyer at a discounted price?

Peter Harris says April 7, 2015 at 7:29 pm

You are assuming that such a cash buyer exists and that this seller has a tremendous amount of options. Sometimes they don’t. Sometimes they don’t reach out for buyers and we find them and they feel that we may be their only legitimate option. But that’s just the beginning of why some commercial real estate sellers choose to do a master lease agreement over selling outright.

Hello;
Peter I enjoyed this video. It is very informative

Hi Peter:
The video was very knowledgeable and something to consider. I am a new investor looking to purchase 5 to 10 units. I don’t have a lot of money to put down. How do I find these type of apartment buildings and investors who are willing to do a master lease agreement? for example you mention foreclose or default properties is there a website that I can go on to look at these properties.

Peter,
This is great teaching! I received more insight from your videos that all the so called “Gurus” have put out! Its amazing, I can see my investing errors! Your training videos are GREAT! Again, Thank you for presenting them.
Valerie Robinson