03 Nov What is the Difference Between Renting and Leasing?
Renting vs. Leasing: Which Is Better?
Over the past six years that I have spent renting an apartment, I’ve considered the difference between renting and leasing often. Recently, I decided to research the differences financially and practically between renting and leasing.
So, what is the difference between renting and leasing? The main difference between the two is that a rental agreement implies an indefinite tenancy, whereas in most cases, leasing involves both parties entering into a legal contract for a certain period. During this time, one party grants use of the property to another for a sum paid overtime (which can be as little as one year or extend up to several decades).
A comparison between leasing and renting is that renters do not own anything (and will not own anything until they purchase), while there is a constant flow of ownership when leasing. With both renting and leasing, the renter and lessor will sign legal documentation to ensure that both parties are in agreement with each other’s terms.
Keep reading to learn more about the differences between renting and leasing!
Is Renting Better than Leasing?
Conventional wisdom says that renting is preferable to leasing. However, the cheapest option depends upon the personal financial situation of an individual.
In a rental agreement, the landlord rents to the tenanted property that belongs to him/her for an amount of money.
A lease agreement, on the other hand, both parties agree on a period during which one party grants use of property the other wishes to use while they pay rent over time.
In most states, if you rented from someone and they passed away, their estate is required to honor the terms of your rental agreement. This is not always true for leases. In some cases, heirs can choose whether they want to assume the existing lease or not, which may result in higher rent payments or changes in other terms of the agreement.
What is the Value of Renting?
Renting an apartment is a great way to get real estate benefits without the full commitment of buying a house. But what is the difference between renting and leasing? The renter has a set term of living at the location whereas lessors have to keep leasing so they can take back their property.
Renters are not expected to contribute towards maintenance – although many will opt-in for an additional fee – whereas lessors are responsible for keeping renters safe and connected via utilities, e.g., electricity, water, etc.
A tenant can be anyone who rents out a property for money. Tenants benefit from renting an apartment because they will pay less money over the same amount of time than if they were to buy. Renting also means that tenants do not need to worry about maintenance and repairs as these matters are the responsibility of the landlord.
It is important to note that when renting or leasing an apartment, there may be extra charges apart from the monthly rent. These charges can include utilities like electricity, water, internet. Some leases even require renters to pay for the gas and/or garbage disposal. Renters may also be required to pay a security deposit if they have had problems paying previous bills.
Reasons to Rent
There are several reasons to consider renting. Some of these reasons include:
- With renting comes flexibility and mobility. This may be an important consideration in the event you need to relocate for a new job or other reasons.
- Rental agreements include protections against eviction and other unfair practices from landlords.
- No repairs will be completed or paid for by the tenet.
- Lower upfront costs. However, if this is not going to be your forever home or if there are any uncertainties about where life will take you next year, then it might make more sense to rent instead of the lease so that you do not get stuck with a high-priced rental agreement when things change unexpectedly.
- When it comes to moving out, most landlords request you give a 60-day notice.
Renting an apartment means that you sign a contract with a landlord who permits you to use the property – usually in exchange for rent – but can also range from selling services like water to sharing common spaces, like laundry machines.
The landlord retains ownership, but you have use of the property for a set length of time. Additionally, lessors (landlords) are obligated to ensure tenant safety and connect utilities like water and electricity.
Conversely, renters do not owe anything to their landlords in terms of maintenance or utility connections; these are covered by the lessee (renter) in their lease agreement.
Legal Contracts for Leasing & Renting
Renters and lessors both sign legal contracts with each other to ensure that everyone is in agreement about the terms of the apartment rental. Here are a few definitions for common legal jargon in a lease:
- Lessee: Refers to the renter, or person who signs a contract with an owner or lessor to rent a property.
- Lessor: Refers to the owner or lessor who rents their property, also known as an investor, out to lessees.
If you choose to rent an apartment instead of leasing one, make sure that the landlord has good reviews from previous tenants so that they know they can trust them. You should also review the security deposit policy – some landlords may ask for two months’ worthwhile others might only require one month’s worth. This could save you money in the long run!
When renting an apartment, always read all terms carefully before signing any contracts. Sometimes renters must pay extra fees at the move-out time. This is often due to hidden costs or clauses within the rental agreement itself.
Make sure everything makes sense before committing yourself financially. It would also be wise to check out what amenities are included in your building such as gym access and parking spaces since these things do cost extra money if not provided by your landlord already (and usually aren’t).
What is the Value of Leasing?
If you are considering entering into a lease, first read your state laws so that you understand your rights and responsibilities as well as those of your landlord. You should never sign an agreement without reading it carefully or hiring an attorney to review it for you first.
While renting comes with fewer obligations than leasing, leases usually last for a longer term. You will want to be sure that you are ready to commit to the property for the full time before signing.
As with renting from an estate, you should also carefully consider leasing from an estate. You can lose your deposit or have a difficult time getting out of a lease if the owner changes his/her mind. This is another good reason to speak with an attorney or local professional about your situation before signing any agreements.
If you are like most people, leasing may be the better choice for you. It offers more stability than renting. It will also allow you to make improvements to the property (at your own expense) without needing permission from a landlord.
Leasing entails paying a fee in return for the right to use the property for a fixed time, making it more like buying than renting. Leasing implies that the lessee has all rights and privileges of ownership during the leasing term, although these vary by state and type of property (commercial vs. residential).
Lease agreements are usually more expensive than rental agreements because, in addition to paying monthly rent, you also need to pay a fee for the lease.
Reasons to Lease
There are several reasons to consider a lease. Some of these reasons include:
- Leasing can allow you access to specialized equipment without having to pay the full price of the equipment.
- Leasing is like renting but paying for something that you might not need forever.
- It is possible to negotiate with the lessor (leasing agency) about what to include in the lease. For example, the lease agreement could specify that the lessee (you) covers certain costs.
- Operating leases offer tax advantages.
- If you are leasing, you often have less responsibility for repairs.
- Ability to get your hands on the newest appliances and fixtures without having to pay extra for them.
- If any repairs are needed during your lease term, the landlord will cover those costs as well so there are no surprises at the end of your agreement.
Disadvantages of Leasing
While there are certainly several benefits, there are also several disadvantages to leasing.
- If the tenant is not able to meet the terms of the lease, they can still be held accountable for monthly payments or even past due payments.
- There may be a penalty for terminating a lease early.
- Leasing agreements usually require that tenants pay more upfront than renters do and sometimes even include additional fees like administrative costs and security deposits (which can add up quickly).
You might want to consider how long you plan on staying in one place when deciding between renting or leasing an apartment. There are a lot of factors to consider when deciding between renting or leasing an apartment.
If you’re planning on moving within the next year, it may not be worth it to sign a lease agreement that will last for several months or years. You might want to look into short-term rentals instead. They typically have flexible terms and shorter leases than traditional apartments.
On the other hand, if you are going to stay put for at least a few years, then signing a long-term lease could be right up your alley! It all depends on what kind of lifestyle fits your needs best.
Are you still looking to learn more? Find more answers to life’s questions here!