Ground or Master Lease

Lease your as-is property to Flexible for one to 99 years. We assume nearly all of the management responsibility and cover most of the expenses, and you get a consistent monthly check.

Lease your as-is property to Flexible for one to 99 years. We assume nearly all of the management responsibility and cover most of the expenses, and you get a consistent monthly check.

Flexible empowers property owners to unlock better outcomes than they thought were possible. One way we do that is by letting owners choose their Offer Type. This article covers the Ground or Master Lease Offer Type, a great option for owners who want to generate income without investing or taking on any debt.

If you’re not sure if a Ground or Master Lease is right for you or your client, use our Offer Type Finder to see other options.

What Is a Ground or Master Lease?

A Ground or Master Lease is used with any type of real estate, but they usually apply to larger investments like shopping malls, apartment complexes, office buildings, resorts, and even vacant land.

A Ground or Master Lease is similar to other rental arrangements between an owner and a tenant. The owner receives monthly rent from the tenant and retains ownership of the property, and the tenant has rights related to using the property. However, there are a few key differences:  

  • In a standard lease, the landlord is responsible for paying the ownership expenses like property taxes, insurance, and utilities. With a Ground or Master Lease, a tenant assumes most of the financial and operational responsibilities.

  • Instead of a lease term that lasts only a month or a year, a Ground or Master Lease often runs for five or more years—or even decades.

  • In a standard lease, the tenant is usually the occupant. In a Ground or Master Lease, it’s common for the tenant to sublease the property to another tenant, known as a subtenant. 

When the Ground or Master Lease term expires, the rights of ownership return to the owner, along with any owner-approved improvements the tenant made to the property, such as renovations, roads, and landscaping.  This can be a valuable benefit for owners who want to make improvements but don’t have the money or time to do so. 

If you’re interested in more attractive terms—possibly higher rent or a larger initial payment—you can offer a “purchase option” in the lease agreement. This gives the tenant the option to buy the property at the end of the lease term.

How It Works

A Ground or Master Lease is a legal contract between you (as owner/landlord) and Flexible (as tenant). We lease the property for a specified period. There's no "standard" master lease, so the deposit amount, monthly payments, and lease term are fully customizable to fit your goals and situation. 

You maintain title to the property, receive consistent monthly income, and are freed of most responsibilities related to owning the property (the specific responsibilities depend on the lease agreement). In most cases, you give the tenant the right to make certain decisions around renovations or other improvements, leasing, and general operations.

Depending on your preferences, we could assume responsibility for all the property's operating expenses, including costs that owners typically pay in standard lease agreements, such as:

  • Property taxes

  • Insurance

  • Utilities

  • Repairs and maintenance

  • Improvements

In most cases, we sublease the property to occupying subtenants and, in doing so, become the "master tenant" of the property—and the one who is ultimately responsible for anything the subtenants do (or don’t do).

The subtenants pay rent directly to us (as the master tenant). In turn, we pay you an agreed-upon rent and cover the property's operating expenses (if that’s part of the lease agreement)—even if the property isn't generating any income.

While a Master Lease typically involves commercial structures, a Gound Lease usually applies to unimproved land, often with a lease term of 50 to 99 years. In general, both parties enter into a Ground Lease with the expectation that the tenant will make major improvements on the land, including renovations or new development. 

With a Master or Ground Lease, the tenant has financial and operational responsibilities during the lease term, and the rights of ownership return to you when the lease expires.

Benefits

A Ground or Master Lease is an excellent opportunity for property owners to generate cash flow without investing any money or taking on any debt. If you have a property that is—or could be—income-producing, a Ground or Master Lease will allow you to take advantage of these benefits:

  • You get passive income. A Ground or Master Lease lets you convert a property that isn't earning income into completely passive, long-term, consistent monthly income.

  • Continued ownership. You're still the owner, so you continue to take advantage of appreciation, depreciation, and equity building as your loan balance drops.

  • You save time (and stress). If your property is already income-producing, you can switch from high-stress property and tenant management to a passive income stream with zero vacancy, repairs, and management.

  • You can make more money. A Ground or Master Lease often provides a higher monthly income stream than you could earn managing your own tenants or—if you sell—investing your after-tax sale proceeds.

  • You can defer taxes. A Ground or Master Lease is a smart alternative to selling if capital gains and depreciation recapture taxes are a concern because it won’t trigger taxes.

  • It's a simple strategy. A Ground or Master Lease can be a more straightforward, lower-risk alternative to a 1031 exchange because ownership never changes hands.

A Ground or Master Lease with Flexible offers even more benefits, including:

  • Full customization. Flexible structures the lease based on your goals and situation, including your preferences for the deposit amount, monthly payments, and lease term. You can choose a fixed rental rate, where you know exactly what you get every month, or opt for a performance-based rental rate. With this option, you get a fixed percentage of rental revenue—and when we do well, so do you. Of course, we can also offer a blend of the two revenue options. 

  • More options. Flexible gives you outside-the-box options to end the lease at predetermined intervals throughout the lease term, in case you need to do so.

  • More value. Flexible helps you participate in higher cash flow and higher value over time because you get a guaranteed monthly income and benefit from any improvements made to your property.

Terms to Discuss with Flexible

A Ground or Master Lease with Flexible gives you options. When you're ready, contact one of Flexible's Offer Guides to discuss:

  • The duration of the lease, including your minimum desired term and the latest end date.

  • Your need for additional cash flow during the lease term.

  • Your goals for oversight, decision-making rights, participation in operations, and other terms.

FAQs 

Who is an ideal candidate for a Ground or Master Lease?

A Ground or Master Lease is a good choice if you:

  • Want access to long-term passive income while maintaining ownership.

  • Want cash flow but don't want to deal with property management.

  • Want to defer capital gains and depreciation recapture taxes that would be triggered if you sold your property.

  • Don't need a significant lump sum of cash in the near-term.

  • Would like to sell your property, but you have a substantial prepayment penalty on your loan.

What if I have a loan on the property?

The treatment of existing loans on the property depends on several factors, including the quality of the loan and the structure of the Ground or Master Lease. In most cases, the loan remains in place, and you continue to make your monthly payments. Alternatively, Flexible can take over the loan payments or pay off the loan when the lease is signed.

What's the duration of a typical Ground or Master Lease?

There's no standard lease term. In general, a Ground or Master Lease runs for at least five years and can last for several decades—or more. Flexible is willing to explore any duration that works for your goals and situation.

When would the owner share some financial responsibility?

If a Ground or Master Lease is less than 15 years, it might be appropriate for the owner to cover the costs for items that have a useful life beyond the lease term—for example, a roof, pavement, or a major structural component. A Ground or Master Lease agreement with Flexible is completely customizable, so you can decide the level of responsibility and involvement that’s right for you.

This article is intended for informational purposes only and should not be construed as financial, legal, tax, insurance, or investment advice. Flexible encourages you to contact an Offer Guide to discuss your unique situation and consult qualified third-party financial, legal, tax, insurance, or investment professionals prior to making any related decisions.

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