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Rental Leasing Guide: The Differences Between Leasing and Rental Agreements

Rental Leasing Guide: The Differences Between Leasing and Rental Agreements

Did you know that renters make up about 36% of the nation's 122.8 million households? As prices continue to soar, individuals are looking to rent instead of own in many cities.

For landlords, this is a good thing. However, as the market fluctuates, knowing the type of rental leasing agreement to offer will dictate your cash flow and vacancy rate.

Should you offer a leasing or rental agreement? Keep reading to learn the differences between a lease agreement and a rental agreement.

What Is a Lease Agreement?

A rental leasing agreement provides a tenant the right to live on a property for a certain amount of time. The contract is long-term and generally allows housing for 6-12 months.

Residential leases are clear and include terms of expectations between the landlord and tenant. The terms may include rules on the following topics:

The best lease contract will protect both parties. Neither the tenant nor the landlord can change the agreement once it is signed unless they have consent from the other party.

What Is a Rental Agreement?

A rental agreement is similar to a lease agreement, but they do have a major difference. The main difference between the two is that one is more long-term than the other.

A lease agreement is a long-term contract while a rental agreement provides tenancy for usually 30 days. A rental agreement offers month-to-month tenancy.

Rental agreements usually automatically renew at the end of the month unless otherwise noted by a landlord or tenant.

The landlord and tenant can change the terms of the agreement at the end of each month if the appropriate notice procedures are followed.

Lease Agreement vs. Rental Agreement

When it comes to a lease agreement vs. rental agreement, the specific contract depends on the landlord-tenant relationship. There are pros and cons to each contractual agreement.

A leasing agreement is structured for long-term, stable occupancy. For landlords, this can provide a more predictable rental income stream.

A rental leasing agreement can prevent landlords from benefiting from an increase in property value because the rental cost is set in stone until the agreement is over.

A rental agreement offers more flexibility because it is short-term. You can edit the rent price each month to match market fluctuations.

The cons of rental agreements include that you might deal with more frequent turnover and your income stream is more unpredictable.

What Method of Rental Leasing Is Right for You?

To be a successful landlord and make the most income from your properties, you need to know the differences between a lease agreement and a rental agreement.

Rental leasing offers long-term options for renters which allows landlords to have a stable form of income. Rental agreements offer more leniency in terms of pricing but can cause frequent turnover.

A rental property management firm can help you figure out which option is best for your units. Contact us today to discover how our services help property owners like you.