It’s time for you to move out of your parent’s house to find a place of your own. While shopping around for a home, you see the terms lease and rental agreement thrown around. Aren’t they the same thing?
That is a common misconception. Lease vs. rental agreement, which one is better for your situation? That depends on how much freedom you want to have.
When you take out a lease, it’s difficult for you to move around whenever you want. On the upside, you’ll never have to deal with a price increase.
Those aren’t the only pros and cons that you need to think about. Check out this guide to learn if you should go with a lease or a rental.
What Is a Lease Agreement?
Before we start talking about pros and cons, it’s important to know what a lease agreement and rental agreement are. We’ll go over the former first.
A lease agreement is a contract between a tenant and a landlord. It guarantees that you’ll have a home for a certain period of time (usually 6-12 months).
Once the lease is up, you can open up negotiations to sign a new contract. If you don’t renew, you’ll have a few days to gather your things and leave.
The duration of the lease isn’t the only thing that’s in the contract. It will also go over the agreed rental amount, along with policies on pets and garbage. Nothing in the contract can change without written consent from both parties.
What Is a Rental Agreement?
Rental agreements work a lot like a lease. The difference is that the contract has a shorter duration. Instead of ensuring that you’ll have a home for 6-12 months, you’ll have about 30 days.
The good news is that at the end of the month, you’ll have the option to renew your lease and continue living on the property. Like with the lease agreement, if you can’t pay the amount, you’ll have to pack your things and leave.
How Are They Similar?
From looking at the definition of both options, it’s easy to see how someone could get them confused. They do have a lot of similarities that don’t end with duration.
In both cases, you’ll have to pay some kind of security deposit. It will cover any damages dealt to the property during your stay. For example, putting in new flooring if you happen to stain the old carpets beyond repair.
You may have some utilities lumped in with your rent. There could be a bit in the contract that states your landlord can enter the home whenever they want.
Most landlords will only allow for a certain number of pets, and most of the time, there are restrictions on dog breeds. You might not be able to own any exotic animals either.
Pros of Leasing
If you’re planning to stay in one place for a large amount of time, it’s better for you to go with a lease. Again, it will guarantee that you’ll have your home for at least 6-12 months.
Once you sign your lease, you’ll be locked into the rent amount. The landlord won’t be able to increase it until it comes time to renew.
There are some places that are rent-controlled. What this means is your amount can’t increase when it’s time for your lease to renew.
If it does go up, it will only be by an insignificant amount. It makes staying in large cities more doable for lower-income families.
Pros of Renting
Despite the short duration of the contract, there are advantages to doing a rental agreement. It offers a lot more flexibility. For example, let’s say that you’re in town for an internship.
Going month by month will cover you until that’s done without locking you into a long-term agreement. If you know that you’re going to talk to a company for Investment Properties to trade up your apartment for a house within a few months, signing the temporary contract isn’t a bad idea.
Rental agreements make it easier to accommodate for large life changes. If your boss wants you to move to a new area for a job, you won’t have to wait out a lengthy lease before you leave.
Cons of Leasing
Once you sign your contract, that’s it. You’ve agreed to stay in one place for at least 6 months. You won’t be able to break your lease without forking over a lot of money.
If you’ve got to move for work, you may have to pay the rent for all the remaining months. That’s not doable for a lot of people.
Cons of Renting
Sometimes too much flexibility is a bad thing. Both yourself and the landlord can walk away from the agreement whenever. If you want to renew at the end of the month, and the landlord doesn’t, you’ll be out of luck.
Again, one thing that renting and leasing have in common is that the landlord can increase the amount you pay whenever the contract renews. That’s not too big of a deal when you’re renewing once every year or so, but when it’s once a month, things can get expensive pretty fast.
Lease vs. Rental Agreement? What’s Better for You?
Lease vs. rental agreement. Choosing between the two can feel difficult when you don’t know the difference between the two. It boils down to contract duration.
If you’re planning to stay in one place for a long period of time, leasing is the superior option. Those who want to stay in a home temporarily can get by with a month-by-month rental agreement.
No matter which option you choose, you’ll want to make your space your own. Visit the Home Improvement section of our blog for some great pointers.