So you've just purchased your first investment property- fantastic! Now it's time to do some property management and decide what to do with your new building.
What is the difference between rent vs lease real estate and what is the right choice for you?
If you are new to real estate, then you should start by learning the difference between renting and leasing an apartment or home. That way, you can decide what works best for you and your clientele.
Rent vs Lease
The main difference between renting and leasing a place is the amount of time involved. A rental agreement typically lasts a shorter amount of time; this is typically 30 days or less. Meanwhile, leasing can last between 6 to 18 months. A lease can be filed on a month-to-month basis once the initial time period has elapsed.
Rental agreements may also be changed by either party over the course of the agreement. Leasing agreements, however, are set in stone once both parties have agreed to the terms.
There are quite a few similarities between rental and leasing agreements. Both have a specific set of rules that must be followed, such as whether pets are allowed or not. Both also require some form of security deposit. Because of these similarities, it can be hard to decide whether to rent or lease a house or apartment.
Benefits and Drawbacks of Renting
Renting offers a sense of flexibility that isn't achievable with a lease. Should either party decide to end or change the terms of their contract, they are able to do so. That means that you and your renter are able to adjust your rental agreement should any big changes come your way.
That also means that you are free to adjust the rental cost as you see fit. You can revise the rent cost each month to stay in line with the current fair market rent.
Unfortunately, short-term rental agreements can scare off those looking for a long-term place to stay. The knowledge that the agreement can change every month is a drawback to many renters. You may also have trouble keeping your place filled if you live in a low-occupancy area.
Benefits and Drawbacks of Leasing
Leasing offers stability both for you and your tenant. Your main worry is to find someone to lease your location and wait for their regular payments.
Unfortunately, you won't have any flexibility with this option; once your tenant has signed their side of the agreement, they're there to stay. Until the lease agreement has ended, you and your tenant will have to abide by the agreements in your contract. There is potential to miss out on property price increases during your lease time.
Understand Your Choices
If you're trying to decide between rent vs lease real estate, then just keep these pros and cons in mind. Hopefully, you'll be able to use them to make an educated decision on the fate of your property!
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