Why Tenant Credit Matters More Than Most Beginners Realize
A lease is only as strong as the party obligated to pay it.
When an investor buys a leased retail property, they are in part buying a promise. Tenant credit is the measure of how reliable that promise is.
Who is actually on the lease
A recognizable storefront name does not always mean the parent company signed the lease. Leases may be signed by a subsidiary, a franchisee, or a single-purpose entity. Reviewing the lease and any guaranty is essential.
Credit and pricing
Buyers generally accept lower yields for income backed by financially strong tenants. Weaker or unrated credit typically demands a higher return to compensate for the added risk of default.
Examples are hypothetical and for education only. This article is not investment, legal, tax, or financial advice.
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