QUESTION: Commercial real estate: how to check a tenant and a lease agreement?
Checking a tenant and a commercial real estate lease agreement is a critically important stage that directly affects the stability of your passive income and the safety of the premises. Before closing the deal, it is necessary to thoroughly analyze the financial condition of the potential tenant, their business reputation, and their real ability to fulfill all financial obligations under the agreement on time.
To minimize risks when working with commercial real estate, it is always useful to calculate both the baseline scenario of events and a pessimistic stress scenario that takes into account possible payment delays or the tenant's early departure. Be sure to include a financial cushion of 10–20 percent in case of property downtime or unforeseen repair expenses after tenant turnover.
Decide in advance which specific expenses, operating fees, or marketing budgets you are ready to cut first in the event of deteriorating market conditions. This approach will maintain business profitability even in a crisis and protect you from cash gaps when working with large spaces.
The process of comprehensive verification of the tenant and the agreement itself can be divided into several consecutive stages for ease of control.