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How Different Real Estate Business Models Work

Buy and Lease Back Agreement

Say you own and operate a company in a building that you also own. YOu sell the building to an investor and become the tenant. This makes you a lot of cash and give the buyer of the property dependable income with you as the tenant.

Just make sure you think about things like parking, signage, utilities, insurance, ingress/egress, and renewal options!

Unless you're trying to grow into new locations rapidly this usually isn't the best long term play in my opinion. What I would rather do is refinance the property and pull out the appreciated value to go buy another property. But it all depends of course!

What is a Land Lease

Why buy the building when you can just own the land beneath the building? Doing it this way you can make the owner of the building on your land lease to you. This creates a lot of dependable income.

What is also nice is you generally don't have to do much at all with the building. Any issues they have are their own. So you just collect a check.

Sometimes you can even put a time limit on whoever builds on your land so that in say, 100 years, you get the building on top of your land.

Quite the multi generational play!

What is a Master Lease?

Lets say you lease an entire office building. There are 10 individual offices in the building.

How you make money is buy leasing out all the smaller offices for a sum that is larger than your master lease amount. So if your monthly master lease amount is $10,000 and you rent each office for $1,500, then you will make a profit of $5,000.

Building owners like this because it "fills up" their property relatively quickly and gives them less oversight because you essentially become a mini version of the building owner.

Just be realllly careful with making these leases. You get one thing wrong, like parking, and you'll have a lot of trouble filling up your units.