The vast majority of commercial real estate deals are “conventional” with regards to financing, meaning they are financed with a commercial lender requiring 20% – 30% down. But it's important to have other, perhaps more creative financing techniques at your disposal because they can get you into a deal when traditional methods fail.
One of those techniques is the master lease.
While the details of a master lease can vary widely, here it is in a nutshell using a case study scenario.
Let's say you're looking at an apartment building and have determined it's worth $1.5M based on actual financials. The building has problems: there is quite a bit deferred maintenance and as a result, the owner has about 30% of the units empty and he hasn't raised rents in the last 5 years. The building needs some TLC and better management. You think that if you sink about $120,000 into the building and replace the property manager, the building would be worth $2.5M.
Unfortunately, the seller is dead-set on $1.7M, and nothing less. And he's certainly not going to give you a $120,000 repair credit.
In this article, I'll show you how to purchase this property with no money down and profit $800,000 in 2-3 years when you sell it.