Owner’s Guide Alternative Structures
Seller financing and master lease options: getting paid over time.
Instead of an all-cash sale, an owner can sell with seller financing — carrying a note and receiving monthly payments with interest — or enter a master lease option, in which the buyer leases the entire property, takes over management, and holds an option to purchase at an agreed price. Both structures can spread taxable gain over time and produce ongoing income without landlord responsibilities.
§1 Seller Financing
You become the bank. The building keeps paying you.
In a seller-financed sale (a “carry-back”), you receive a down payment at closing and carry a note for the balance, secured by a recorded mortgage on the property. The buyer makes monthly principal-and-interest payments on agreed terms — commonly a meaningful down payment, a market-informed interest rate, and a 5–10 year term, often with a balloon payment.
Why sellers choose it
- Monthly income at an interest rate that frequently beats what the sale proceeds would earn in the bank.
- Installment-sale tax treatment. Gain is generally recognized as principal payments arrive rather than all at once, spreading the tax bill across years and potentially keeping you in lower brackets. (Depreciation recapture follows different rules — your CPA should model your specific numbers.)
- A stronger overall deal. Flexible terms often support a better price than an all-cash discount.
- Security. A recorded mortgage means that if payments stop, you can foreclose and take the property back — keeping everything paid to date.
What to weigh
You wait for your money, you retain lender-style risk until the note pays off, and the paperwork must be done properly. This structure works when it’s documented by a competent attorney and the buyer is one you’d trust to operate the asset well.
§2 Master Lease Option
Keep the title. Hand off the work. Define the exit.
Under a master lease option (MLO), Ironwood leases your entire property at a fixed monthly rent, assumes operations and the expenses specified in the agreement, and holds an option to purchase at a price set today, exercisable within an agreed window — typically two to five years.
For the owner, that means: dependable rent without tenants, toilets, or turnovers; continued ownership benefits until the option is exercised; and a known sale price and timeline already on paper. It suits owners who want relief from management now and a defined exit later — and owners whose current basis or timing makes an immediate sale less attractive.
What to weigh
The option price is fixed, so you give up upside if the market runs; you remain the titleholder, with the obligations the agreement leaves with you (commonly debt service, taxes, and insurance unless negotiated otherwise); and the agreement quality is everything. Like a carry-back note, an MLO is only as good as its documentation and its counterparty.
§3 Structuring With Ironwood
Every offer can take the shape that fits your goals.
Every Ironwood offer can be structured as cash at closing, seller financing, or a master lease option — and we’ll show you the same property priced under more than one structure if it helps you compare. Tell us what matters most: the biggest check, the steadiest income, the smallest tax bill this year, or the cleanest handoff.
How does seller financing reduce my tax bill in the year of sale?
It generally doesn’t reduce the total tax — it spreads it out. Under installment-sale rules, gain is typically recognized proportionally as principal payments are received, which can keep you in lower brackets and defer much of the bill across the note’s term. Depreciation recapture rules differ, so run the numbers with your CPA.
What protects me if the buyer stops paying?
A properly documented seller-financed sale is secured by a recorded mortgage on the property itself. If the buyer defaults, you have the same core remedy any lender has: foreclose and recover the property — keeping the down payment and payments already received. Have your attorney paper it correctly.
What is a master lease option?
An agreement in which a buyer leases the entire property, takes over operations and agreed expenses, and holds an option to purchase at a set price within a set period. You keep title and receive dependable monthly rent; the buyer runs the building and earns the right to buy it.
Why would Ironwood offer these structures instead of just paying cash?
Because different sellers need different things. Some want a lump sum; others want monthly income, a smaller tax bill this year, or a defined exit a few years out. Structuring the offer around your goals often lets us agree on better overall terms for both sides.
This information is educational and is not tax, legal, or investment advice. Every situation is different — consult your CPA and attorney before making any decision.
Tell us what matters most to you.
Share your property details and your goals, and we’ll put structure options in front of you in writing.
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