When A Master Lease With Option Is – And Is Not – A Good Solution

There’s a unique strategy that has been used to construct clever mobile home park deals over the decades, but it rarely gets much notoriety. The name of this strategy is a “master lease with option” and it can be a win/win for many situations – as well as the worst idea ever in other circumstances. So what is a “master lease with option”, how does it work, and when is it a good or bad idea?

How this structure works

A “master lease with option” has two components: 1) a lease or specific duration in which you make a monthly payment for complete control of the property including all revenue and expenses and 2) an “option” price in which you can buy the mobile home park at any time during the lease. For example, let’s assume the master lease is $5,000 per month and the option is $650,000. In that case, you would pay the park owner a flat $5,000 at the start of each month and then – at my option – I can buy the mobile home park for $650,000 at any time before the lease ends.

When is it a good idea?

A “master lease with option” is a great idea when you have a property that needs better management to make it worth the price the seller demands. Under this arrangement, you can take full control day one – even though you don’t own it – and get to work making it more profitable until it hits the net income needed to support the loan and hit the appraisal. If the deal fails to work, you have no risk because you don’t own it and can simply walk away. The three drivers to greater profitability at your disposal are typically 1) raising rents 2) filling vacant (but ready) park-owned homes and 3) cutting costs (typically firing the manager and replacing them with a lower-cost alternative). You can even submeter the water if the upfront cost is in your budget.

When is it a bad idea?

A “master lease” cannot cure all evils, however. And the big one is occupancy. You cannot increase occupancy typically under a “master lease” because you can’t spend the capital necessary to bring homes into vacant lots when you don’t already own the property. And programs like the 21st Mortgage CASH program are not possible to quality for until you own the land. So when occupancy is the factor that is holding the property back from where it needs to be to meet the appraisal, then a “master lease” typically will not work. And, in many failing properties, that’s a major limitation.

Other lessons learned

One of the big lessons learned in successfully doing many of these “master lease with option” deals over the past 25+ years is that you must get everything in writing. That’s because they always have the same ending. You get it all perfect and call the owner to say that you are ready to exercise your option and they say “are you kidding? – the property is worth way more than what we agreed on now”. It’s only natural that the seller does not want to honor their original commitment when you have the property in such a higher-income producing format. As a result you must have an attorney craft the document so that that the seller cannot back out in the end. It’s almost guaranteed to happen.


A “master lease with option” is a great concept in the right applications. It does not work for every deal, but when it does it is often a home run. Consider this concept on the next deal that has trouble appraising for the target amount the seller demands.

Frank Rolfe
Frank Rolfe has been an investor in mobile home parks for almost 30 years, and has owned and operated hundreds of mobile home parks during that time. He is currently ranked, with his partner Dave Reynolds, as the 5th largest mobile home park owner in the U.S., with around 20,000 lots spread out over 25 states. Along the way, Frank began writing about the industry, and his books, coupled with those of his partner Dave Reynolds, evolved into a course and boot camp on mobile home park investing that has become the leader in this niche of commercial real estate.