1031 Exchanges
Commercial Real Estate
FREQUENTLY ASKED QUESTIONS  



HOW DO YOU DETERMINE THE CREDIT WORTHINESS OF A TENANT?

"Credit" tenants have investment-grade credit rating from a nationally recognized rating service and are considered the most desirable. Generally BBB- and up are considered investment grade. Credit tenants can provide greater security and typically lower returns than non credit tenants. Investors looking for higher returns frequently invest in properties with regional and local tenants. Both the current credit worthiness of the tenant and the tenant’s business model should be considered to determine long term viability. 

The tenants need to be carefully investigated to make sure that the investor fully understands the risk and whether or not they are being compensated for taking that risk. Above all else the real estate fundamentals need to be understood and independently verified. A common error single tenant net lease investors make is to buy the tenant while not giving full weight to the long term impact of the underlying real estate.  There are a number of sources for information regarding public companies including www.zacks.com and www.freeedgar.com.