What's the Difference Between Lease and Rent?
It's common for people to use the term "lease" and "rent" interchangeably, but there are subtle differences between the two. While leases and rental agreements are also standard in various industries, including cars and RVs, we're going to look at how these agreements apply to apartments, townhouses, condos, and other real estate assets.
Difference Between Leasing vs. Renting
A lease contract on an apartment usually indicates a long-term agreement. Many landlords will only offer rental leases for one year at a time. However, if you live in a saturated city with low inventory, like New York City, renters sometimes ask landlords to extend a two-year rental agreement. In these cases, they may still have the right to raise the rent after the first year.
The rental agreement may cover a month-to-month term or a specific time period. For example, if you want to move in with a roommate already listed on a long-term lease agreement, a landlord may extend a rental agreement to you to finish out the rental term. Once those terms are up, the landlord could extend a new lease to you and your roommate instead of a rental agreement.
Similarities Between Leasing and Renting
Leasing and renting are similar processes and they both require signing a contract and securing a security deposit.
The security deposit covers any damage to your apartment and a landlord can keep your deposit if you fail to pay rent. But if you uphold the end of your contract and leave the apartment in good shape, you'll get the security deposit back.
Leasing and renting contracts should both specify costs and who pays them. The landlord only pays for water in some cities, while the tenants pay for all other utilities. Both leasing and renting will typically include extra costs, including pet fees or additional charges for the use of on-site parking.
In some cases, a landlord may cover all utilities in a month-to-month rental agreement. These accommodations may be in a short-term apartment complex or room in a home. It's often easier for a landlord to cover all of the utility costs by lumping the average expenses into your rent.
Pros and Cons of Leasing vs. Renting
While leasing and renting are similar, there are pros and cons to each. Here's what to consider before you sign the next contract on your apartment.
Pros of Leasing
Signing a long-term lease means your rent is locked in, meaning there are no rent increases for the duration of your lease. Leasing also provides more stability. Unless you fail to pay your rent, you know you have a place to live as long as your lease is still active.
Lastly, leases give you a better shot at long-term rental stability. Landlords don't always raise rents or do so slowly at the renewal of your lease.
Cons of Leasing
There are some downsides to signing a lease on an apartment. They're less flexible, and it can be both difficult and expensive to break a lease. If you're thinking about relocating or hitting the road to living your dream of being a digital nomad sooner than later, an apartment lease probably isn't' for you.
Pros and Cons of Renting
Rental agreements also come with their own unique set of pros and cons. Here are some things to consider before entering into your next contract.
Pros of Renting
The short-term flexibility of a rental agreement is a win for many renters. You can try out a brand new city, neighborhood, and job, getting to know the area before you decide to settle in. Once you make up your mind, you can move on at the end of your rental agreement.
Other renters may not know if their job is stable enough or if they'll be moving around. A rental agreement is ideal if your plans are up in the air.
Once your monthly rental agreement is up, you’ll have the opportunity to renegotiate the rate. Apartment rentals usually dip off during the winter months. Depending on the rental trends, you may be able to ask for cheaper rent.
Moving is expensive and often eats up a significant portion of your budget. Instead of scraping by with a bed and a chair, you can sign a short-term rental that comes furnished. A rental gives you a chance to save up for furniture and all the extra touches you could want in a long-term apartment. If you plan to move on within a year, a furnished rental is also ideal and could save money in the long run. You won't need to relocate or store furniture when you move.
Cons of Renting
A rental agreement isideal in some situations, but there are some cons to the process.
Rental agreements aren't stable. The landlord has no obligation to extend your contract after a month or the agreed-upon length of time. If your rental agreement ends, you may be left with little notice to find a new place to live.
Rental agreements are also more expensive than traditional apartment leases. Landlords assume more risk than you may move out at the end of each month and spend time and resources keeping up with the contract and administrative work.
Lastly, rent increases are common with rental agreements. If the market demands change or inventory dips in your city, your landlord can raise your rent at the end of your contract. If your job pays for a rental agreement as part of a relocation package, renters are stuck paying for the increase with no recourse.
Which is Right for Me?
There are pros and cons to signing a long-term lease or short-term rental agreement. It all comes down to preference.
If you're looking for long-term stability and the best rents possible, sign a lease on your next apartment. You'll have a better chance at settling in and keeping your rent as low as possible.
Renters who want ultimate flexibility, are moving around, or aren't sure if they're going to settle in should sign a short-term rental agreement.
Whether or not you choose a lease contract or a rental agreement on your next apartment, make sure you read your contract thoroughly and ask plenty of questions. Good luck! The more prepared you are, the better your experience and transition into your new apartment.