The Master Lease Option In Creative Financing
Are you scared of beginning a real estate investment because of low cash? Are you delaying your investments for better days when you will have acquired enough money to begin an investment? It is about time you stop worrying. You should get to learn about creative financing. Creative financing is the art of purchasing a property with the buyer using less of his money as possible. Of the many strategies of creative financing, the master lease option is one of the very interesting and profitable way of starting an investment.
Master lease in real estate is where you lease an income producing property as a single tenant and thereafter sublease it to occupant tenants to get rental income from them. As a leasee of the property, you will be given some of the rights over the property. You can be able to modify the property as you wish. This can be an opportunity for you to add value to your property by for example renovating it to even look better. This way, you can increase the rental charges thereby getting profit.
You can also decide to buy the property. This will obviously take some time for you to be the complete owner, since you have less money at the time. The owner of the property will give you a fixed period of time to complete paying for the property, at a price that you and the owner of the property will agree on. You will therefore have to pay for the property in instalments. Similarly, if you only want to use the property for a given period of time, you will have to make regular payments until you complete the payment.
Master lease has got less risks involved, and it is one of the best and easiest ways of getting into the real estate business because you get to acquire benefits with less or no money. You do not have to get a loan from the bank. All the profits that come from the rents from the tenants come directly to you. Another profit of this type of lease is that once the property appreciates, it can represent your equity which serves as your down payment when buying the property, that is if you decided to buy the property. If one decides to sell the property, it would have already gained value, he or she will get profit from it.
However, it works in a way that even if the subtenants fail or stop paying you the rent, you as the leasee will have to still pay the instalments. Some people may get negative outcomes instead of gaining profit, due to the property condition, where one has to really work on renovating the property for it to look better. A leasee can still take back the property to its owner because they still have the legal ownership of the property. You have a right to inspect the property before deciding to master lease in order to mitigate the risks.