Differences between Commercial & Residential Tenant

[Yan P.]

I have been looking at primarily residential properties where I will live in one of the units and rent out the rest. I have a pretty good idea of what I will be up against in a residential in Chicago. However, I have found a mixed use property with retail on the bottom floor that is fairly priced and offering owner financing. What are some of the differences between commercial and residential tenants that I should be mindful of as an owner? (I am sure evictions are much faster, big plus in Chicago)

[Joel Owens]

(I am sure evictions are much faster, big plus in Chicago)

What on earth would make you think that??

Commercial tenants can be credit rated tenants with corporate guarantees or the mom and pop type.The mom and pop type carry usually the most risk as a start up.

Franchised stores such as Quizno's or a Subway generally there is less failure as the corporations makes sure the operator meets liquidity and certain training requirements.What usually kills mom and pop type businesses is poor planning and making the same mistakes over and over again.

This is where a franchise is strong in that with their franchise fees the operator gets national and sometimes local marketing.They also get tried and true processes and systems to follow which greatly reduce them screwing up.

With a mom and pop you are going with an unproven startup which if fails has very little to no assets to go after.Sometimes a mom and pop will have multiple locations and be more credible with assets and experience that are less risky tenants.

When taking on a retail tenant that is unknown or not well known ask questions about how they will bring in business and their marketing plans.

Many start ups believe you open up and people will find you and the business will come flooding in.This is absolutely untrue.

I remember Papa Johns pizza back when I was working as a stockboy at Wal-mart as a teenager. That was the early nineties.Nobody had ever heard of Papa John's.They had to go in the area in the parking lot and hand out free pizza with coupons for the next month or two.

Commercial tenants you won't get the call that the toilet is stopped up at night,etc.

Different animal.