richard geller’s special report: how to buy apartment...

Richard Geller’s

Special Report:

How To Buy Apartment Buildings With a

Master Lease Option What You Will Take Away From This Report:

An incredible method for taking control of apartment buildings with no cash and no credit.

The details of what goes into a master lease option.

What you can do to generate high profits by using cash flow from the property.

The exact information you need to provide to the seller to convince him or her that a master lease option is a win-win for both of you.

How two months of your effort setting up a quality management system will generate tens of thousands of dollars in passive monthly profits for years to come.

This is your ticket to entering the highly lucrative apartment ownership business with no money and no credit!

(Results are not guaranteed. Read disclaimer and use this information with care; laws differ depending on state.)

Copyright © 2012 Calworth Glenford, LLC dba www.financialsuccessinstitute.net All rights reserved. Reproduction in any form without express written consent from

www.financialsuccessinstitute.net is prohibited. Any names used in this course are for illustration purposes and are not designed to refer to real people or real organizations.

Disclaimer – this limits our liability – Read it!

In plain English, I did my best to make this the best report I could make it, for someone wanting to start a businesses that will succeed in these tough economic times and those ready to move forward as the recession slowly fades into the past. But I am sure that I left stuff out, forgot some important stuff, and made some mistakes.

Plus, I can’t know the laws of your state, and the facts in your particular situation. And I’m not a lawyer nor do I play one on television. Some of this stuff MAY NOT WORK. Or it may be ILLEGAL. Who knows.

So…

You have to take responsibility for whatever you do or don’t do after going through my report. Don’t blame me!! I am not responsible for what you do!!

If I were you, I’d find a good attorney to advise me. And I’d check out whatever it is that anyone tells you to do – me, the attorney, your mother-in-law, whoever.

Then I’d take my chances. Life is full of risks. You could do great following my advice. Or you could fall on your face. Who knows, maybe some of the stuff I suggest is illegal in your state. I don’t know. But regardless, you can’t go after me for telling you to do something or not do it – because I am right now disclaiming any liability. You are on your own!!

And with that out of the way, read on…

While the publisher and author have used their best efforts in preparing this report, they make no representations or warranties with respect to the accuracy or completeness of the contents of this report and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor

author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential or other damages.

And another important note – this one about ethics

The techniques I outline in this report – some of them anyway – may strike you as pretty outrageous. Unethical perhaps. You may find a few techniques that you can swear are illegal.

I don’t advocate anything illegal. And I don’t want you to do anything unethical. These techniques exist. People do them all the time. I don’t want you do be at a disadvantage by not knowing them. So I tell you about them, no holds barred.

I think it’s too easy to judge others when you haven’t been in their shoes. Some people are in frightful situations and they are frankly quite desperate. They need answers. I hope, if this is you or your clients’ circumstance, you find answers, some of them here.

That doesn’t mean I think you ought to do things that are unethical, or that things you choose to do are right for everyone. That is for you to decide. Okay?

And a final important note – this one about plagiarism!

You DO NOT have permission to resell this information. You DO NOT have permission to give it away to someone else. This information is sold under a license that lets you read it, use it FOR YOUR OWN USE, but not give it away, make copies, sell it, or resell it.

For another copy, contact me at: [email protected]

Thank you!

mailto:[email protected]

Special Report: Buying Apartment Buildings on a Master Lease Option

© 2012 Financial Success Institute. All rights reserved. www.financialsuccessinstitute.org

4

Table of Contents

Mastering the Master Lease Option ........................... 5

The Master Lease Option Explained .................................... 5

There are Many Reasons to Buy on a Master Lease Option ......... 7

Benefits for the Seller.................................................... 8

Benefits for the Buyer.................................................... 8

Win - Win for Both Seller and Buyer ................................... 9

One Disadvantage to the Buyer ......................................... 9

What Must Go Into a Master Lease ..................................... 9

Master Lease Option Combines the Best of All Financing Methods ........................................................... 12

Grow Your Apartment Building Portfolio ............................. 12

You Don't Even Need a Motivated Seller.............................. 12

Who Needs Banks When You Have the Master Lease ............... 13

Here's an Example ....................................................... 14

Success Strategy for Your Profitable

Master Lease Plan .............................................. 16

Master Lease Business Plan Summary ................................. 16

Future Vision For the Building ......................................... 17

Current Market Analysis................................................. 18

SWOT Analysis ............................................................ 19

Maximizing Profits From Your Master Lease .............. 24

Know What It Takes to Succeed With a Master Lease Option ..... 26

What Else You Can Master Lease Option ............................. 26

Appendix A

Master Lease Option Letter of Intent ....................... 28

Appendix B

General Master Lease Option Contract ..................... 31

Special Report: How To Buy Apartment Buildings With a Master Lease Option


5

Photo courtesy of: www.flickr.com/photos/ncindc/2727275056

Mastering the Master Lease Option

There are many ways to purchase an apartment building,

commercial loans, with money partners, with private loans, etc.

However, taking control of an apartment building through a

Master Lease with an Option to Buy is the best method for a real

estate investor lacking experience in owning a multifamily

property.

A master lease option can be a win-win for both the seller and

the buyer.

The Master Lease Option Explained The master lease is sometimes called a sandwich lease. It gives

you complete control of the

property including the ability to

sublease the units and collect the

rents. This can be a powerful tool

for increasing the cash flow from

the property and therefore your

profits.

To begin with, the master lease

and the purchase options are two

different contracts. Some people

combine them into a single

contract but you're better off

Your profits come from

improving the

property cash flow



6

writing and signing the master lease separate from the purchase

option agreement.

The purchase option agreement entitles you to buy the

apartment building at any time up until the agreement period

runs out. However, it does not require you to buy the building.

Everything in the contract is very flexible as long as you (as the

buyer) and the seller agree on what is written.

The purchase option agreement gives many advantages to you as

the buyer. If you're buying a distressed apartment building, it

gives you the chance to turn it around. If you can't turn it

around, you simply don't exercise the purchase option. If you

don't have much experience managing an apartment complex, it

gives you an opportunity to see if you can succeed at it without

investing any money. There are other advantages that will be

brought up throughout this report.

In addition to the master lease giving you full control of the

property, it also makes you fully responsible for the apartment

building. From the cash flow, you have to pay all of the expenses

and taxes. If you want to make capital improvements, you need a

clause in the contract allowing you to do that and the cost will

come out of income generated by the property.

The length of the master lease and the purchase option are

typically tied together. If the purchase option period is two

years, the master lease will likely be for the same amount of

This leaves you all

the best options



7

time. How long that is, is completely up to you and the seller. If

the seller needs to take their equity out of the property, they

may only offer a one year option period. If they want to continue

receiving the monthly lease payment for years to come, they

may offer a ten years option period.

If you are more interested in the cash flow from the property

than taking ownership, you may want a long term option period.

If you want to take ownership and stop making the monthly

master lease payment, you will want a short option period. If

financing is a hurdle you need to clear, you may want a medium

option period until you can get a loan or improve your credit

history or build equity through appreciation. Once you have

successfully managed the apartment building for a year or two,

one choice that often opens up is seller financing so that you

don't need a bank loan.

Now you understand the basics of the master lease option. After

finishing this report you will clearly understand the details of the

master lease option and why it is one of the best creative

financing methods that let's you become an apartment building

owner for little or no money down!

There are Many Reasons to Buy on a Master Lease Option:

A bank probably won't make a loan if the buyer has no

experience with apartments. A three-year purchase option

gives you three years of experience in the business.

The master

lease can provide answers to any

situation you are in



8

Banks are afraid of distressed apartments. You may be able to

turn it around during the purchase option period.

As the buyer, you gain access to the cash flow for the cost of

the purchase option (if any).

You may not be sure a distressed property can be turned

around. A purchase option let's you walk away if the building

can't be saved.

The seller may have a real need to keep the property titled in

his or her name. They offer you a serious discount for doing it

this way.

Other reasons that are as unique as every commercial real

estate deal is.

Benefits for the Seller:

Ongoing lease payments on the equity in the building.

Easy sale of the building.

No longer needs to be involved in day-to-day operations.

Not financially responsible for maintenance and repairs.

Continued tax write off benefits.

Benefits for the Buyer:

Little or no money down.

Control of the building with no banks, lenders, or appraisal

involved.

All net operating income exceeding the lease payment is

pure profit to you.

Any or all of these might

apply to the next master

lease deal you

transact



9

Increased cash flow by reducing costs and increasing

revenue.

The option to purchase at a set price regardless what the

actual value of the property is at the end of the lease

period.

Often can be converted into seller financing.

Win - Win for Both Seller and Buyer:

No banks bogging down the transaction.

Seller and buyer can become as creative with the terms

and conditions as they want to be.

Seller and buyer both derive income from the property

until the sale closes.

One Disadvantage to the Buyer:

Easier for seller to foreclose if buyer does not perform to

contract.

What Must Go Into a Master Lease A master lease is very similar to typical commercial financing but

there are a few differences. It's essential that both sides have an

attorney draw up and review the contract. Don't use a general

master lease contract from an office store or Appendix B at the

back of this report. Have a contract drawn up that is specific to

the apartment building involved.

Although the property is not being bought out right during the

master lease, the intention is for you to buy the property. For

You plan to buy it, so for all intents

and purposes, treat the master

lease as a purchase



10

Photo courtesy of: www.flickr.com/photos/weidnerapartmenthomes/4235114079

that reason, a title search needs to be done before entering into

the master lease contract. The buyer needs to know if there are

any liens on the property and if there are, what they are.

In Addition, the buyer will want to

have an attorney, escrow company, or

another third party hold the executed

deed and/or the original contract

documents.

Both the master lease and the

purchase option should be recorded

with the county clerk's office. This

tells the world that the buyer has an

equitable position in the property and

the seller is not free to enter into

another contract without the

permission of the master leaseholder.

As with any real estate transaction, it's a good idea to have an

appraisal done, have an inspection done, and go through the

entire due diligence process.

The buyer needs to have a definite exit strategy. Do you plan to

buy and hold the apartment building as part of your portfolio? Or

do you plan to improve the cash flow and sell for a profit?

Finally, both the buyer and seller have a vested interest in

making sure the existing loan, taxes, and any other liens against

Never buy investment real estate without an

exit strategy



11

the property are being paid in a timely manner. There are a few

ways this can be taken care but the best is having a third party

be responsible for the payments and report to both the buyer

and seller immediately if a payment is missed. In this

arrangement, the buyer would typically send the monthly

payments to the third party for them to distribute according to

the contract. Another option that is often used is setting up

online accounts that both the seller and buyer can access. That

enables the seller to monitor the monthly payments.

By no means is that everything that needs to go into a master

lease option agreement. It is the minimum. Every real estate

deal is different and will have different requirements. My strong

advice is that you consult a knowledgeable commercial real

estate attorney before entering any master lease option

agreement.

You can learn other ways you can profit from commercial real

estate by visiting:

www.financialsuccessinstitute.org

http://www.financialsuccessinstitute.org/



12

Master Lease Option Combines the Best of All Financing Methods

Master lease agreements are nothing new. They have been

around for centuries. While the phrase "lease option" is typically

associated with single-family residential properties, the phrase

"master lease" means much the same thing but applies to

commercial properties.

Grow Your Apartment Building Portfolio

The master lease option method is a great way to get into

apartment building investing and grow a large portfolio over the

period of several years. After you turn one building into your own

profit generator, you can turn day-to-day operations over to a

competent property management company so that you can take

control of another building without any of your own money,

again using the master lease option process. Over the years, as

you exercise your purchase options, you'll grow your portfolio of

profitable apartment buildings into millions.

You Don't Even Need a Motivated Seller

Another great thing about master lease options is that you don't

need to find a motivated seller or someone offering seller

financing. You can offer near full price without putting any of

your own money in the deal. Then you let appreciation and the

improvements you make to the building add to your equity.

Shortly, you'll build enough equity to qualify for a 70% bank loan

to make the purchase.

Discounted pricing is good but

not required



13

More likely, the type of seller you are looking for is someone that

is tired of the day-to-day management of the apartment

building. Maybe someone that is ready to retire but needs a

steady income to continue in the form of a master lease

payment.

Or someone that has seen the income steadily decline and

doesn't know how to turn the deteriorating situation around.

Who Needs Banks When You Have the Master Lease Let's face it, not many of us have the 30% down payment, perfect

credit, and a few hundred thousand in reserves that the banks

require to make a loan.

However, the master lease allows you to control the building and

keep all the positive cash flow above the master lease payment

and accrue equity in the building. The value of commercial real

estate is determined in a very different way from residential.

Whereas residential real estate values are determined by recent

sales of comparable houses in the neighborhood, commercial

property values are mostly determined by the cash the business

throws off.

As you improve the management of the property and increase

cash flow, you automatically increase the value of the property

itself.

No matter what stage of the real estate investing game you are

in, it's easier to get into apartment investing through the Master

Here is what you

want to do



14

Lease Option method where you enjoy monthly income with little

effort.

Here's an Example Let's say you sign a master lease option on a 75 unit building that

is 65% occupied. The average rent is $700 per month and other

income sources like parking and laundry facilities bring in $4,500

per month. The current income is $38,625 a month.

There is a $600,000 owed on a 30 year amortizing mortgage that

costs $4,222 a month. Property taxes come to $8,750 a month

and insurance adds another $1,500. Staff and maintenance costs

add up to $6,500 and miscellaneous expenses $1,200. The

monthly total expenses come to $22,172. The NOI is $38,625 -

$22,172 = $16,453.

Typically, this determines your monthly master lease payment to

be $16,453. If the apartment building has no positive income,

you'll have no monthly master lease payment.

You immediately go to work filling the vacancies and within six

months, you reach 92% occupancy. During the same six months,

half of the yearly subleases come due and you bring the rents up

to market rate. The average rent is now $755. Additionally, you

find a less expensive insurance provider to bring insurance down

to $1,200 a month. However, that is off set by an increase in

your staffing, maintenance, and repair costs, which go up to

$6,800.

Every deal will be

different

It's best when you

have plenty of room for

improvement



15

Your monthly income is now $52,095 from rent but the ancillary

income remains at $4,500. The total income is now $56,595. Your

expenses are the same because you shifted the insurance savings

into more maintenance and repairs. Your new NOI is $56,595 -

$22,172 = $34,423.

Your monthly master lease payment remains the same at

$16,453.

Your monthly profit after six months now stands at $34,423 -

$16,453 = $17970.

You will continue to grow that monthly payment as you make

improvements to push rents upward and bring in only quality

paying tenants.



16

Success Strategy for Your Profitable Master Lease Plan

How you succeed with a master lease is entirely up to you. Some

people will do it by making critical decisions on the fly and on a

daily basis. However, most people will be best off if they have a

long term plan based on sound information.

This section of the report provides you with a method to develop

that long term plan and gives you the information you need to

thoroughly think through your success strategy.

What helps you succeed is a custom business plan for your

apartment building master lease.

Not only will it help you succeed, showing a solid business plan to

a prospective seller will greatly increase his or her confidence

that you will succeed and they will continue receiving their

monthly master lease payment until you finalize the purchase of

the building.

Master Lease Business Plan Summary The summary is a brief explanation of the situation the building

is in and the key goals you need to achieve in order to profit

from the transaction.

Primary Reason for Master Lease. To increase cash flow and

build up equity without committing cash or credit until it is

proven the property can be turned around.

Start here and drill

down into the details



17

Current Position of the Apartment Building. Several years of

neglected maintenance and low marketing activity has resulted

in the building becoming slightly distressed but likely to be

turned around to increase cash flow and ultimately have a higher

property value.

Success Requirements. Stronger management performance

focused on improving curb appeal and subtenant satisfaction.

NOI must be increased by increasing income and reducing

expenses on a long term basis. The property has the potential to

be among the best multifamily buildings within a six-block

radius.

Financial Reality. The building needs approximately $20,000 in

repairs and maintenance before an aggressive marketing plan can

be under taken. The initial marketing plan is estimated at

$7,000. These expenses must be financed through increased

occupancy on a month to month basis that allows rents to be

increased as the building management and appeal improves.

Future Vision For the Building Long term is for the building to become the most desirable for

working class tenants within a six-block radius. Specific desirable

elements are to create a safe and clean environment with a

reliable management team that tenants can rely on to resolve

issues in a timely manner. The end result is for increased and

stable cash flow.

Learn the financial

needs early in the buying

decision process



18

Specific Goals. Survey current tenants within two weeks to

determine most pressing issues to be addressed. Repair and paint

exterior of the building during the first three months to improve

curb appearance. Provide direction to leasing staff on how to

increase occupancy on a month to month basis to increase cash

flow while reserving the right to increase rents in the short term.

Long term, decrease expenses and increase income to be able to

complete the purchase of the building within 30 months.

Current Market Analysis

The Great Recession resulted in local unemployment reaching a

high of 14.7%. Today local unemployment stands at 9.2% with a 6

month improvement trend. The local fish cannery is the primary

employer and has increased employment by 125 jobs over the

same 6 month period. Suppliers and other employers that rely on

the fish cannery employment have begun rehiring only in the

past 2 months.

The overall apartment rental market is stable after two years of

trending away from 2 bedroom preference into 1 bedroom

preference. Current occupancy rate within the 6 block radius is

87%. Up from 84% a year ago. Rents are stable and will likely

remain so until local occupancy reaches 92%. Once general

market occupancy reaches 92%, rents will trend upwards.

However, increasing appeal for this building is expected to allow

for modest (3%) rent increases short term (1 year) and more

You must know the market if you are going to succeed



19

substantial (10%) increases within 2 years as local occupancy

exceeds 92%.

Current Tenant Mix. Dominantly working class. 15% single

mothers. 12% on section 8. 30% work at fish cannery. 50% are

Hispanic with English as a second language.

Expected Immediate Tenant Needs. Clearly, accountability of

maintenance is a priority. More staff able to speak Spanish will

improve overall communication with tenants. More will be

learned from the 2 week tenant survey that will be in both

English and Spanish.

SWOT Analysis A SWOT analysis looks at Strengths, Weaknesses, Opportunities,

and Threats. Strengths and weaknesses are about internal

operations. Opportunities and threats address the external

marketplace.

Strengths. Current tenant mix provides a good foundation to

build on. 78% of tenants have resided in the building for 2 or

more years. The most urgent maintenance can be accomplished

in less than 6 months. The building was once among the best on

the local market and can be returned to that status by financing

improvement from cash flow. No major capital infusion is

required.

Weaknesses. Existing management team has become lazy,

ambiguous, and even resentful of tenant needs. If this cannot be

You need to know the weaknesses



20

corrected quickly, most of the staff will have to be replaced.

Additionally, while stable, the current tenant mix is not ideal.

Need to reduce dependence on section 8, strongly enforce late

rent fees, and evict those that are 2 or more months delinquent.

Short term, this could result in a temporary reduction in cash

flow. However, the month to month rental plan is expected to

more than offset the loss of late and non-payment tenants.

Opportunities. Improving employment and local occupancy

numbers provide ample opportunity to increase rents long term.

After initial costs of repairs and maintenance, the building will

again be among the most desirable on the local market.

Threats. Competing buildings beyond the 6-block radius offer

better amenities, which cannot be fully provided by this

building's current infrastructure. These include secured gated

access, covered parking, common rooms for business meetings

and social events. These can be partially offset by adding

inexpensive amenities to this building such as free wifi access

and improved main door security.

General Strategy. Exploit the high volume drive-by traffic and

easy freeway access. First by improving curb appeal and then

with ongoing marketing. Maximize the rent for the 20 3-bedroom

apartments by emphasizing they are over sized and include a

large patio with a view of the mountains.

Upgrade the leasing office to include a comfortable waiting room



21

with television. Remodel to provide separate rooms for private

conversations and to read and sign paperwork.

Additionally, heavily market the shopping and entertainment

venues that are in easy walking distance. Also highlight the extra

storage available in the basement. However, the extra storage

will be converted from free to another source of income.

Study the possibility of adding carports over existing parking

areas to better compete with apartments outside the 6-block

radius that have covered parking.

Add low cost security cameras throughout the complex. Improve

main door security by adding security cameras that tenants can

view online before allowing visitors to enter the building.

Implement a tenant satisfaction program to increase retention of

desirable tenants while moving out troublesome tenants.

Begin rehabbing empty apartments as cash flow allows.

Marketing Plan. Immediately implement a referral program that

encourages tenants to recommend the building to family,

friends, and work associates.

Train leasing staff in modern and effective marketing techniques

that include a website, craigslist, and social marketing. Create a

cash incentive program for reaching occupancy targets.

There are many low cost but effective marketing strategies

that can be used



22

Banners on building, after repairs and paint, announcing the

building is under new management. Offer small gift incentive for

taking a tour of the building (maybe theater tickets).

Begin holding tenant appreciation days such as barbeques and

Friday evening cocktail hour along with special events on

holidays that create tenant interaction and a sense of

community.

Marketing strategy will be adjusted based on what works best to

attract and retain the most desirable tenants.

Day to Day Operations. I will live on the premises for at least

the first 2 months to provide guidance and training to staff and

oversee contractors. The current desk top property management

software will be changed to an online version that I can monitor

from home once I leave the day to day management to the on

site team.

Change current accrual accounting system to cash system to

better account for actual cash flow.

Review the current organizational structure after being active at

the property for a couple of weeks. Make personnel changes if

necessary.

A detailed maintenance and repair plan will be developed after a

thorough due diligence is conducted but before the master lease

agreement is signed.

At least early in the

change process you need to be

present every day



23

Make additional changes after a full review of the tenant survey.

Financial Model. See attached spreadsheets of the projected

financial statements. Including Annual operating data, balance

sheet, cash flow, profit and loss statement, a ratios analysis

spread sheet, along with the breakeven analysis. These are only

projections and will be updated several times after taking master

occupancy of the property.

Exit Strategy. Hold and improve the property to generate profit

from improved cash flow. If financial goals are achieved, the

purchase option will be exercised before or upon expiration of

the master lease period. After purchase and upon returning the

property to its full potential value, the property will be sold for

full value based on favorable market conditions.

Forecast your

financials but know they will change



24

Maximizing Profits From Your Master Lease

You can often get into a master lease for no money down.

However, it takes some work on your part to create income that

goes into your pocket. What you do is offer the seller/owner all

of the current net operating income (NOI) as the monthly rent

payment.

NOI is the income generated by the apartment complex minus

the operating expenses.

That means in the beginning, you are managing the property

without being paid. The NOI is the profit after all expenses have

been paid. The current NOI is agreed to between you and the

owner. It is locked in for the term of the master lease. Now you

need a way to increase the future NOI because that becomes

your profit.

There are several ways to increase the NOI but you need a solid

plan before you enter into the master lease agreement. One of

the simplest ways to increase the NOI is by raising the subtenant

rents as their individual leases come up for renewal. This works

best if the seller has failed to keep rents at market value. As

subtenant leases come up for renewal, you simply bring the rent

into alignment with the market to create a profit for yourself.

Filling vacancies is another way of increasing the NOI so that you

start receiving an income.

Here is how you start making money



25

Before you know if you can increase rents or fill vacancies, you

need to see the current rent rolls. And you need to know the

local market.

Cutting expenses is still another way to increase the NOI to

create an income stream for yourself.

Here are more ways to increase the NOI and your profit:

Make improvements to the property that enables rents to

be increased.

Implement a regular maintenance program.

Remove problem subtenants and replace with quality

tenants.

Attract and retain a better quality of tenants through

improved aesthetics and attentive management.

Individually meter units to shift utility costs to subtenants.

Reduce turnover with better management and aesthetics.

Encourage word of mouth tenant referrals to eliminate

advertising expenses.

Find lower cost property and liability insurance.

And it gets better. Not only do the changes you make to bring in

better tenants, improve living conditions, and reduce cost, but

these same changes increase the value of the building. When it

comes time to exercise the purchase option, you might well have

You will find more

ways based on your specific

deal



26

the 30% equity the bank requires to make the loan. That will

allow you to borrow a 100% of the money to pay off the seller.

Know What It Takes to Succeed With a Master Lease Option The successful master lease tenant insists on knowing these four

important issues:

1. The master lease must allow subleasing so that the landlord

can't cut off your source of profits.

2. Know the local rental market and the prevailing rent rates

for similar apartment units.

3. Sublease only to creditworthy tenants that can and will pay

the rent.

4. Perform background checks to keep undesirable people out

of the buildings.

What Else You Can Master Lease Option

You can master lease any commercial property that has cash flow.

Besides apartments, other common commercial properties that

work well for master leases are:

Trailer parks

Hotels

Motels

Office buildings

Strip malls

Student housing

Other ideas for using a

master lease option



27

While it's true that you will find active master lease

opportunities in all major cities, there are opportunities in rural

America as well. Have you ever wanted to manage a campground

or RV park? One of these could be the master lease opportunity

you are looking for.

You now have the information you need to successfully become

an apartment building owner without investing a dime of your

own cash or credit. All you need now is to take the action step

towards making it your reality!

If you want to learn about more wealth generating ideas that

require little of your time or money, please visit us at:

www.financialsuccessinstitute.org

http://www.financialsuccessinstitute.org/



28

Appendix A Master Lease Option Letter of Intent

June 3, 2012

Mr. Peter Holms

Commercialinvestor.org

Franks & Ganes

51710 East 274th Street

Highlands, MO 63049

RE: Letter of Intent for the Master Lease Agreement with the Option to Purchase Parkland Apartments (“Property”)

Dear Peter:

Please find outlined below the general terms and conditions under which the Master Lessee/Optioner (“Lewallen”), would be willing to provide management services to the Property under the terms of a Master Lease Agreement (“MLA”) as well as to provide an Option to Purchase (“Option”) the above referenced Property. This letter will serve as a non-binding letter of intent between the Lessor/Optionee (“Seller”) (represented by Franks & Ganes) and Lewallen or its assignees.

1. TERM: The term of the MLA will be for thirty months (30) with an extension of six (6) months. The extension will be exercisable in the sole discretion of Lewallen.

2. RATE: Seller shall be paid the current monthly Net Operating Income (“NOI”) less the existing monthly debt service payment. In the event that the NOI is not enough to satisfy the debt obligation, the Seller shall provide funds sufficient to cover any shortfall.

3. SUB-LETTING: Lewallen has the right to sub-let any part of the facility to individual tenants.

4. EXPENSES: Lewallen shall pay all operating expenses of the Property. The Seller shall be responsible for all capital expenditures for the property during the term of the MLA.



29

5. MANAGEMENT: Lewallen shall be solely responsible for all

management responsibilities. Seller shall assign management contract to Lewallen.

6. INSURANCE: Seller shall be required to carry commercial liability

insurance and shall add Lewallen as additional named insured. 7. OPTION PRICE: Purchase Price of the Property shall be paid by

the following terms and conditions:

Purchase Price: $X,XXX,XXX

Option Price $ 20,000

Earnest Money Dep. $ XX,XXX

First Mortgage $X,XXX,XXX

8. OPTION TERM: The term of the Option shall run concurrently with the term of the MLA.

9. INSPECTION PERIOD: Lewallen shall have twenty-one (21) days from the date of execution of the Master Lease/Option to Purchase Agreement to perform inspections and examine the records of the Property. If, for any reason, during this Inspection Period, Lewallen shall find the Property unsuitable, Lewallen, by written notice to Seller, shall have the right to declare this Letter and any contract based hereon null and void and receive a refund of any Earnest Money that has been deposited.

10. EARNEST MONEY DEPOSIT: A refundable Earnest Money Deposit in the amount of $XX,XXX will be deposited with the escrow agent within three (3) business days after signing the Master Lease/Option Contract Agreement.

11. MASTER LEASE/OPTION TO PURCHASE: Both parties will strive to execute a mutually acceptable Master Lease/Option to Purchase Agreement within 15 days after the execution of this Letter of Intent. The date of completion of the signed agreement shall be the “Effective Date.”



30

12. BROKERAGE FEES: To be paid by Seller as per agreement with Seller’s agent.

The above represents the general terms and conditions of the proposed transaction. The exact terms and conditions will be contained in a mutually acceptable Master Lease/Option to Purchase.

Should the above proposal be acceptable to you, please execute your signature below and Lewallen Properties will begin preparation of the Master Lease/Option to Purchase Agreement. Thank you for your consideration and we look forward to the opportunity to work with you on this transaction.

Lewallen Properties:

BY: ______________________________________________________

NAME: ____________________________________

TITLE: ____________________________________

BY: ______________________________________________________

NAME: ________________________________

TITLE: Owner / Manager

ACKNOWLEDGED AND AGREED TO THIS 3rd DAY OF June, 2012.

SELLER:

BY: ____________________________________________________

NAME: ____________________________________________________

TITLE: ____________________________________________________



31

Appendix B General Master Lease Option Contract

This lease, dated for the identification purposes as of the ________ day of _____________, 20__ between ______________________________________

(hereafter referred to as the landlord) and ____________________________ (hereafter referred to as the tenant).

Witnesseth: That the landlord hereby demises and leases unto the tenant, and the tenant hereby hires and takes from the landlord for the term and the rentals herein after specified, the building(s) known as ______________

_____________________________ (the premises). See description attached and incorporated as Exhibit A. The premises are shown on the Assessors Map ___________ as Plot ___________.

The initial term of this demise shall commence on ______________________ (the commencement date) and end on ________________________ (the termination date). The monthly base rent for the first ___________ (_____) months of the demised term (the initial period) shall be ________________ and 00/100 ($____________) dollars payable on the commencement date and thereafter in monthly installments, in advance, on the same day each month thereafter. The base rent for the period subsequent to the initial period, if any is set forth in Exhibit B.

Rent is to be payable at __________________________________ or as may be otherwise directed by the landlord in writing.

The above letting is upon the following conditions:

1. Landlords Obligations. The landlord covenants that the tenant, on paying the said rental and performing the material covenants and conditions in this lease contained, shall and may peaceably and quietly have, hold, and enjoy the demised premises for the term aforesaid.

2. Use of Premises. The landlord and the tenant agree the tenant will be subleasing the property or individual units therein to third parties. Rents and other use and occupancy charges shall be due to the tenant and any sums received by the landlord shall promptly be remitted to the tenant.



32

3. Default. The tenant shall pay to the landlord, or landlord’s agent, the base rent and any additional rent at the times and in the manner above provided. Upon failure to pay any rent or other sum due in good funds within twenty (20) days after receiving written notice from landlord or failure to discontinue any other material violations, if applicable, of this agreement within thirty (30) days after receiving written notice thereof then (except as otherwise provided below with respect to extensions beyond the thirty (30) day period, the tenant shall thence forth, at the option of the landlord, be terminated, and the landlord may reenter and may re-let without further notice or demand, but such termination of rights, entry and/or letting shall terminate the tenant's obligation for any rent to be paid or covenants to be performed during the remaining term of this lease*. The tenant is making substantial investment in the property and the parties shall, in recognition thereof, deal in good faith regarding and alleged default and provide a reasonable opportunity to cure any default. In the event that landlord has alleged any non-rent violation of the lease by tenant, and in the event that cure of said violation reasonably requires more than thirty (30) days as reasonably necessary and/or address said violation.

* In the event the landlord does not agree with the language releasing the tenant for all liability in the event of termination, then add the following. The landlord shall use reasonable efforts to mitigate any alleged damages by collecting all rent and other charges due from subtenants and re-letting the premises or any part thereof. For the purpose of letting or re-letting, the landlord shall be authorized to make such repairs or alterations in or to the leased premises as may be necessary to place the same premises in as good order and condition as at the commencement of this lease. The tenant shall be liable to the landlord for the cost of such necessary repairs or alterations. If the sum realized from the landlord's mitigation is insufficient to satisfy the monthly rent provided in this lease, the landlord, at its option, may require the tenant to pay the deficiency. The tenant shall be entitled to a credit against any liability to the landlord from any surplus accruing as a result of the re-letting. Notwithstanding any provision to the contrary, the tenant shall always have the right to cure any alleged default at any time and to re-enter and occupy under the terms of this lease provided the tenant shall first pay the landlord for all rent and costs due and reimburse the landlord for the landlord's out of pocket costs incurred in attempting to mitigate and to prepare the premises for reletting with a credit for all sums received by the landlord for rent and other charges.



33

In the event of any violation of this agreement by the tenant or by the landlord, the other party shall be entitled to recover their costs and fees incurred as a result of such breach, including reasonable legal fees and expenses and sheriff or constable fees.

4. Tenancies, Assignment, and Subleasing. The premises are leased with the understanding that the premises and parts thereof will be leased or let to other, subject to the limitations that (i) no lease or occupancy agreement shall be for more than one year and (ii) no unit shall be rented for less than ninety (90%) percent of the prevailing fair market rent for similar units in the market area. The landlord certifies that the rent roll attached hereto as Exhibit C fully and accurately depicts the current rental rate applicable to each unit, the rent, if any, owing: and any security deposits the current or last month's rents held by the landlord and any interest due thereon. The landlord warrants that no tenant is in violation to landlord's knowledge, of any lease or occupancy agreement and the landlord has received no notice that any tenant considers the landlord to be in breach of any lease, occupancy agreement or governmental requirement. Copies of all leases and occupancy agreements are attached hereto. The landlord agrees to cooperate with and indemnify the tenant in the event of any disputes with a subtenant relating to facts or conditions arising to the date of this lease.

5. Conditions of Premises. Except as provided below, the tenant shall keep the entire demised premises all in good condition, and shall maintain the said premises as may be necessary to keep it in repair and in good appearance. The landlord shall be responsible to repair the structure of the buildings(s) and the tenant shall be responsible for the equipment, fixtures or appliances serving the same except for the following: ______________________________________________. In the event either party fails to maintain the premises, in accordance with this agreement, then the other party shall notify the defaulting party in writing and provide a reasonable opportunity to address the alleged matter, and in the event that said matter is not addressed, then the non-defaulting party may conduct such maintenance and repair at the expense of the other and the cost shall be paid by the defaulting party. Any reimbursement due the tenant may, at the tenant's election be by a reduction in rental payment due the landlord. The tenant shall not make any material alterations, additions, or improvements to said premises without the prior written consent of the landlord, which consent shall not be unreasonably delayed or withheld.

Existing at and/or upon the property at the commencement date, shall be the landlord's responsibility and the cost for bringing the



34

premises into compliance with all laws, regulations, and codes including environmental laws, regulations, and codes applicable at the commencement date shall be the landlord's responsibility. The landlord warrants that, as of the commencement date, there is no lead paint, no violation of any health, safety, or environmental requirements and no underground petroleum storage tanks on the premises.

6. Mechanic's Lien. In the event that any mechanic's lien is filed against the premises as a result of alterations, additions, or improvements made by the tenant, the landlord, at its option, after thirty (30) days written notice to the tenant, may declare the tenant in default if the lien has not been released or the tenant has not taken good faith efforts to contest the lien or to secure the release within thirty (30) days after the tenant's receipt of such notice.

7. Glass. The tenant agrees to replace at the tenant's expense all glass, which may become broken in and n the demised premises.

8. Insurance. Tenant shall procure and during the term of this lease, maintain Comprehensive General Liability Insurance covering operations at the premises. The insurance shall name the landlord as an additional insured. Tenant shall furnish landlord with certificates of such insurance. The landlord shall maintain fire and extended insurance coverage on the premises at replacement value. The landlord's insurance shall name the tenant as additional insured.

9. Utilities. Utilities and services (without limitation, heat, trash removal, hot water, water, sewer, electricity, phone) shall be the responsibility of the tenant or subtenants of the tenant. In the event the tenant requires additional utilities or equipment, tenant may install said utilities and equipment and tenant shall maintain said utilities and equipment at tenant's expense. Rea estate taxes shall be paid by: ___________________. Personal property taxes, if any, shall be paid by: _______________________.

10. Entry on Premises. The landlord, or its agents, shall have the right to enter the demised premises at reasonable hours of the day or night, upon reasonable advance notice to the tenant except in emergency situations, to examine the same, or to make repairs, additions, or alterations as it shall deem necessary for the safety, reservation, or restoration of the improvements (there being no obligation, however, on the part of the landlord to make any such repairs, additions, or alterations).



35

11. Damage or Destruction. If, through no fault of tenant, the premises or any part thereof is damaged by fire or casualty, or if the premises or any part thereof is destroyed by action of war, enemy action or civil defense, or if any of the foregoing causes damage in excess of ______ ______________ ($________) dollars to any material portion of the premises, then tenant may terminate this lease upon promptly giving written notice to the landlord. Until the lease is terminated, a proportionate adjustment to the rent due the landlord shall abated to reflect rents not collected from subtenants and other expenses incurred as a result of such damage or destruction.

12. Legal requirements. The tenant agrees to observe and comply with laws, rules, and regulations of the Federal, State, County, and Municipal authorities applicable to the premises and the business to be conducted in the demised premises.

13. Recording Notice of Lease. The landlord shall execute a memorandum or Notice of Lease, prepared by tenant and in the form of satisfactory to tenant referring essential terms of the lease, for recording by tenant with the appropriate government registry.

14. Notices. No notice, approval, consent or other communication permitted or required to be given by this lease will be effective unless the same is delivered during normal business hours; (i) by hand, (ii) by overnight carrier, or (iii) send postage prepaid, by United States certified mail, return receipt requested, or by any other manner permitted by law for service of process to the other party at the following addresses (or to such other address as any party may designate by written notice as foresaid):

If to the landlord: ____________________________________________________________________________________________________________________________________________________________________________________________________________

If to the tenant: ____________________________________________________________________________________________________________________________________________________________________________________________________________

15. Bankruptcy and Insolvency. It is further agreed that if at any time during the term of this lease either party shall make any assignment for the benefit of creditors, be decreed insolvent or bankrupt according to law, or if a receiver shall be appointed for a party, then



36

the other may, at his option terminate this lease, exercise of such option to be evidenced by notice to the effect served upon the assignee, receiver, trustee, or other person in charge of liquidation of the property of the party or their estate, but such termination shall not release or discharge any payment or sums then due hereunder or any liability then accrued by reason of any agreement or covenant herein contained.

16. Expiration of Lease. In the event that the tenant shall remain in the demised premises after the expiration of the term of this lease without exercise of any option to extend or having executed a new written lease with the landlord, such holding over shall not constitute a renewal or extension of this lease. The landlord may, at its option, elect to treat the tenant as one who has not removed at the end of his term, and hereupon be entitled to all the remedies against the tenant provided by law in that situation, or the landlord may elect, at its option to construe such holding over as a tenancy from month to month, subject to all the terms and conditions of this lease, except as to duration. In any event, the landlord acknowledges the premises shall be occupied at the termination of the lease by subtenants and occupants, and agrees to accept the same and the tenant's responsibilities and rights hereunder. From and after the termination date, the tenant shall have no further liability with respect to this lease or any sublease or subtenant.

17. Condemnation - Eminent Domain. In the event of any taking, tenant shall receive any amount attributed to any portion of the improvement constructed, installed, or paid for by the tenant. Tenant shall have the option to terminate this lease if any material portion of the demised premises is taken, or any material portion of the access to the premises to the demised premises is taken. This lease will automatically terminate, effective as of the taking, if all of the demised premises are taken.

18. Exterior Maintenance. The tenant shall be responsible to keep the premises in good order. The tenant shall properly maintain landscaping and place all rubbish and refuse of any description in sanitary and not unsightly receptacles for that purpose, said receptacles to be provided by the tenant. The tenant shall be responsible for plowing snow from the premises and for removal of standing ice.

19. Commencement of Rights. No rights are to be conferred upon the tenant nor obligations imposed until this lease has been signed by the landlord, and an executed copy of the lease has been delivered to the tenant.



37

20. Rights Not Exclusive. The foregoing rights and remedies of landlord and tenant are not intended to be exclusive but as additional to all rights and remedies the landlord and tenant would otherwise have by law.

21. Parties Bound. All of the terms, covenants, and conditions of this lease shall inure to the benefit of and be binding upon the respective heirs, executors, administrators, successors, and assigns of the parties.

22. Modification. This instrument may not be changed orally, but only by written instrument signed by the parties.

23. Broker. The landlord and tenant each represent and warrant to the other that it has dealt with no broker in connection with this transaction except ______________________ and agree to defend, indemnify, and save the other harmless from and against any and all claims for a commission to any other party arising out of this lease and alleged to have been as a result of dealing with the other party.

24. Estoppel Certificates. Within ten (10) days after each request by the landlord, the tenant shall deliver an estoppel certificate as described herein to the landlord. Estoppel certificates shall be in writing, shall be acknowledged, and shall be in form of recording. Each estoppel certificate shall be certified to the landlord, any mortgage, any assignee of any mortgage, any purchase, or any other person specified by the landlord.

Each estoppel certificate shall contain the following information certified by the person or persons executing it on behalf of tenant: (i) whether or not the tenant is in possession of the premises; (ii) whether or not this lease is unmodified and in full force and effect (if there has been modification of this lease, the certificate shall set forth the modification); (iii) whether or not the tenant contends the landlord in default under this lease in any respect; (iv) whether or not there are then existing set offs or defenses against the enforcement of any rights or remedy of the landlord, or any duty or obligation of the tenant (and if so, specify the same); and (v) the dates, if any, to which any rent or charges have been paid in advance.

25. Governing Law. This lease is made pursuant to and shall be governed by and construed in accordance with the law of the state of ___________________________.



38

26. Indemnity. Each party will indemnify and hold harmless the other, its agents, employees, shareholders, officers, successors, and assignees from and against any and all claims, actions, damages, remediation costs, liability, and suits, and expenses (including without limitation, court costs and reasonable attorney's fees) in connection with the loss of life, personal injury, and damage to property or other damages, relating to or arising from or out of, whether in whole or in part, (a) the occupancy or use by the other of the premises, (b) the conduct of its business therein, or (c) any act, misrepresentation herein or otherwise or omission of the party, its agents, contractors, employees, servants, suppliers invitees, or customer, or (d) breach of this agreement.

27. Option to Extend. The tenant shall have the option to extend, if any, as set forth in Exhibit D.

In Witness Whereof, the said parties have hereunto set their hands and seals the day and year above written.

Tenant: Landlord:

By: _____________________________ By: _________________________

richard geller’s special report: how to buy apartment...

Documents