Running a Master Lease Before Closing: What Three Months of Operating First Taught Us

It was a large deal that we worked on all year. We evaluated every property individually. Each address received its own valuation, renovation scope, rental analysis, and disposition strategy. Some properties will remain rentals, while others will be renovated and sold.

Our goal is to do one GREAT deal every year. We do not chase acquisitions for the sake of "having more doors." We focus on specific assets that our team at Three Little Pigs (TLP) is positioned to operate.

What made us stand out as buyers

We were the first group to hear about this deal. Not many groups can take one like it down, and we were a hybrid: an investment arm plus a third-party property management firm that could handle a scattered-site portfolio.

• Too large and complex for smaller local investors.
• Too scattered and transitional for many traditional apartment groups, who prefer single-site communities where management, maintenance, leasing, and capital improvements can be centralized.
• A hard onboarding for third-party property managers. Many would hesitate to take on more than 100 scattered units knowing a portfolio sale could lead to offboarding them almost immediately.
• Cautious larger single-family rental groups, several of which were moving carefully amid growing policy scrutiny of institutional ownership of single-family homes. See what the ROAD to Housing Act actually says.

That left a relatively short list of qualified buyers. The seller wanted a local group that could take over property management before closing and transition the portfolio over time.

How the deal came together

Buyer reputation

Certainty of close mattered. Another 100+ unit single-family rental portfolio in Cincinnati had gone under contract and fallen apart four times, and that buyer forfeited more than $800,000 in earnest money. On a transaction this complicated, credibility, execution history, and problem-solving ability can matter as much as price.

The master lease

We negotiated a master lease that let us operate the portfolio for three months before closing. During that period we collected rents, paid operating expenses, coordinated repairs, managed resident issues, and kept the excess operating cash flow. The seller continued carrying the ownership-level debt and insurance obligations, which let us generate cash flow before closing and gave us three months of real operating experience before taking ownership.

The structure builds on a proven framework from a prior master lease: how to structure the transaction, allocate responsibilities, establish controls, and create value for both sides during the pre-closing period. The general playbook is in master lease agreements: a tool for multifamily buyers.

Lender fit

We financed the acquisition with a local bank that already knew our team and track record. The most important loan term was the ability to complete partial payoffs without a prepayment penalty. Because the properties are individually titled, we can sell homes one at a time and release them from the collateral pool without waiting for a portfolio-wide refinance or sale.

Diligence on every address

We inspected five properties per day, three days per week. Every address had its own inspection, repair scope, tenant history, rent analysis, comparable sales, taxes, insurance considerations, and disposition options.

Advances in AI helped us organize the information, identify patterns, compare properties, and update assumptions across the portfolio. The inspections, contractor input, and investment decisions still required direct human judgment. The full approach is in AI in multifamily due diligence.

Multiple underwriting methods

• Portfolio-level income
• Comparable sales for each address
• Separate single-family, duplex, and multifamily analyses
• Individual retail dispositions
• Rental hold scenarios
• Portfolio sale scenarios

A scattered-site portfolio requires an understanding of both consolidated cash flow and the individual value of each parcel. How to value a scattered-site portfolio covers the two lenses.

The real work starts after closing

Real estate education tends to put disproportionate attention on finding deals, raising capital, and closing. Operations determine what happens next.

Over the past year we focused on building the organization required to execute a transaction of this size. We refined our accountability chart, implemented the Entrepreneurial Operating System (EOS), improved financial reporting, strengthened renovation oversight, and developed clearer systems across leasing, maintenance, finance, property management, and asset management. The closing is the visible milestone, and the organizational work behind it took much longer.

Pro-education, anti-guru

We have all heard the stories of guru groups encouraging inexperienced investors to partner together, raise capital, and aggressively pursue larger acquisitions. Those stories made us more intentional about where we invest in education and outside guidance. Last year we joined a property-management-focused mastermind and hired an EOS consultant.

This article is for informational and educational purposes only. Nothing in it is an offer to sell or a solicitation of an offer to buy any security. Past performance and operational results described are not indicative of future results.