Reference no: EM133086224

Larry is the owner of a mixed-use property that has ten residential units and two retail units. The lease agreements signed by Larry's residential tenants require them to pay a monthly flat rent. By contrast, the lease agreements signed by Larry's retail tenants require them to pay a monthly base rent and 4% of their monthly gross profits in excess of $100,000. In recent years, the gross profits of Larry's retail tenants have fallen. Further, the market rent for retail properties has dropped sharply, but the market rent for residential properties remains high.

(a) What type of rent do Larry's residential tenants pay?

(b) What type of rent do Larry's retail tenants pay?

(c) If one of Larry's tenants fails to pay their rent, why would it be easier for Larry to evict this tenant if they were a retail tenant, rather than if they were a residential tenant?

(d) Since Larry does not recover any of the building's operating expenses from his tenants, what type of lease agreement have all of Larry's tenants signed?

(e) In light of the loss of gross profits Larry is experiencing from his retail space, what type of risk is associated with ownership of this income property?