MAREI Newsletter October 2020

Page 5

I N V E S T O R

D A V I D

T I L N E Y

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A C Q U I S T I O N

M E T H O D

Control and Profit Without Debt or Ownership with a

Master Lease FROM INFO PROVIDED BY DAVID TILNEY

If you’d like to invest in real estate,

There are many different reasons to

requires the master tenant to pay a

but you can’t afford to buy property

put a master lease into play and

percentage of the funds he receives

or just don’t want to take on a lot of

because you can be very creative in

from his sub-tenant only when he

debt – don’t despair! Think about

what you want to do. Traditional

receives those funds. A fixed lease,

renting your rental properties from

Landlords might acquire single

on the other hand, generally

owners who may be distressed

family homes and then sublease

requires the master tenant to make

home owners or housing providers

them to traditional tenants. A

payments even if he does not have

that need help in managing their

business that needs space for their

a sub-tenant. In the first scenario

properties or maybe just an owner

business might lease more space

the owner takes the risk of only

that wants needs to do something

than they need and sublease the

receiving rent when the master

with a property but they want it

extra space for extra income. And

tenant receives rent from his sub-

back later.

when Airbnb became the hot new

tenant and the owner also agrees to

way to invest in real estate, master

pick up most expenses associated

Think about a sandwich or Master

leasing became the way to acquire

with the property. In the second

Lease.

properties for short term rentals.

scenario the master tenant takes on more of the owner’s responsibilities

A Master Lease (ML) is a lease from

There are two types of master

and risks thereby entitling him to a

a landlord to a tenant, followed by

leases with as many hybrids as

greater profit (or loss) depending

a sublease by the tenant to another

there are owners with different

upon his success of maximizing net

sub-tenant or occupant.

needs. A performance master lease

income from the sub-tenant.


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