How to underwrite a 30-day out on a lease priced for twelve months

Question

Consider a 2 bed unit with two paths in front of it. Unfurnished market rent runs about 2,150. Furnished corporate direct could hold 3,400 a month with utilities and internet included, running around 310 in carrying cost, against a 12k furnishing outlay for the whole unit. A relocation management company placing transferring employees for local employers instead offers a master lease: 2,800 flat, 12 months, they place whoever they want in it. But the draft carries a 30-day termination for convenience clause and pays net-45 on invoices. That hands the owner a 12-month number backed by a one-month commitment, against a mortgage payment that doesn't care which month it is. How should that gap actually be underwritten? Price the termination clause into the rent by discounting the 2,800 to reflect the real expected term, or hold the line and refuse to sign without a minimum paid term. Net-45 terms deserve the same treatment, since they effectively extend the exposure window past whatever the termination clause allows.

Rena Expert · Accepted Answer

Put both offers on the same line before you argue about the clause. Direct at 3,400 less 310 of utilities and internet is 3,090. Furniture at 12k written down over three years is 333 a month. If you turn the unit three times a year at roughly 250 a turn for cleaning and linen replacement, that's another 60ish. Call it 2,700 at full occupancy. At 80 percent it's about 2,080, at 70 percent it's around 1,780, and none of that includes someone answering the phone at 9pm about a broken dishwasher.

The master lease at 2,800 with utilities still on you nets about 2,150 after the same furniture and turn math, and it doesn't move with occupancy. The spread between the two paths is small enough that the whole decision rests on what occupancy you actually believe direct leasing gets you, and a first-year number based on two employers is a guess, not a forecast.

On the clause, a termination for convenience with 30 days notice means you are trading occupancy risk for a lower rent and getting no term certainty in exchange. The usual counter is a minimum paid term, 90 days is a common ask, with the 30-day notice running only after that, plus a stub payment if they leave inside the minimum. Net-45 on top of that means you're floating six or seven weeks of mortgage and utilities on their accounting calendar, so ask for a security deposit sized to a month of rent and get late-payment interest in writing.

The bigger thing to clear first: a master lease to a company that then places its own people is a sublease. Your mortgage documents, any condo or HOA rules, and your insurance carrier all treat that differently from a tenant occupying the unit themselves, and the carrier in particular may not cover a unit where the named tenant never lives there. Whether stays stay outside your city's short-term rental rules also depends on how that ordinance defines a stay and whether occupant swaps inside a term restart it, which varies by city and state. Both of those go to your carrier and to a local attorney before you sign anything, not after.

priya_n21 · Answer

Net 45 plus a 30 day out is the part worth stalling on. That's two months of paying 1,900 plus utilities out of pocket with an empty unit and an invoice nobody has approved yet. The 2,800 only looks like a floor if the money shows up on a schedule that can be planned around.

chriswalton8 · Answer

Ask who's actually signing. RMCs often paper these through a local operating entity with almost nothing in it, and the parent stays off the document entirely. If the name on the lease isn't the balance sheet being relied on, the 90-day minimum @rena-expert describes is only worth what that shell can pay. Push for either a parent guarantee or two months held up front, and ask whether they've done master leases in this market before or whether this would be the pilot.

How to underwrite a 30-day out on a lease priced for twelve months

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