Weekend Wisdom: The Master Lease

In this short clip Danny Plueddemann explains to us what a master lease is, how it works and why is may be a great option for remote real estate investors. ---   Tom: Hey listeners, Happy Saturday, we're trying a new thing where we're doing little micro episodes. And today we're going to be talking a little bit about the master lease as a little something over the weekend. We're here with Danny Plueddemann. And Danny, tell us about the master lease.   Danny: Yeah, yes. And most people think there's two options you are you going to self manage or hire a property manager, like, those are the only two options out there. And this is a third option, and it's better is better for me as a property manager, and usually is better for them. So yeah, I'm your tenant. So instead of hiring me to be your property manager, you rent the place to me directly. And I'll hit you up for discount on the rent for a long term lease, and I'll try to sublease it and it's for something higher, and I'll try to make money on the spread.   If I'm smart, if I'm doing do a great job, if I'm an awesome property manager, I'll make some money, but I'm responsible for that payment, whether the property is occupied or not. So I'm taking on all the vacancy costs, and I'm taking on a low maintenance cost. So I'll fix whatever's wrong, I'll pay you whether it's vacant or not. So there you go, steady income, and then I got skin in the game, you know what I mean? If I really care about, you know, property, managed to say, I'm gonna care about your property, just like mine, maybe, you know, but everybody understands that you're the one making the mortgage payment, the place goes vacant, you're the one who's replacing the water heater, if that breaks, so that's your problem. So this is the way you know, for, you know, really savvy investor that, you know, I know, my NOI is gonna be this much, can you match it? Beautiful, I'll do it. And then it's for other people. I mean, the last one I did was was a 23 year lease, she just wanted me to match her mortgage payment and pay your house off. That's it. So I'm gonna give her house back free and clear and 23 years, and she's thrilled. And then she's going to have an asset, you know, as free and clear before she had a liability. And she knew she had a liability because it was vacant, and she was cutting, cut the grass, pay the bills and pay the taxes, pay the insurance, and she was losing her mind. So we cut we call it the perfect tenant program. I'm your I'm your tenant, I'll rent it from you. That's it. And then. So anyway, hopefully that explains why it's better for the investor, and then why it's better for the property manager. Frankly, if we can get the landlords out of the way we can do a better job. I know, I know, there's not supposed to say that there's a lot of property managers out there clutching their hearts, they don't talk bad about landlord, but you know.   The asset is the tenant, you know, the house, a vacant house is a liability. So if we can focus on the tenant, and do a good job for the tenant, this is a strange business because we you know, the tenant is one that pays us, but the landlord's one that hires us. So we're always caught in between here's always posted, you know, we have to we have to deal with the landlord wants to know whether they're telling us to do the right thing or not. They're the one who hired us. So we got to do it that way. But then the person that paying us is the tenant, so we know how to make money. So anyway, that's kind of a long answer.   Tom: Yeah, it's an interesting program, you know, talking about different types of leases out there, and you miss out on a little bit of downside of if there's some major rent depreciation, but it's a little bit of a hedge of just, you know, vacancy where you're collecting that rent month in and month out,   Danny: Ideally, rental prices will go up. And I would benefit from that. On the other hand, if rental prices go down, like th