Lease Vs Rent. buying a property instead of renting is the right option for most property owners. It may not be the right option for everyone, but if you are serious about owning property and want to understand the pros and cons of both options, then here is a breakdown of the two.
What is lease vs. rent?
A lease is a legal agreement between two parties. A rental is a temporary agreement that allows one party to use a property. A lease agreement will usually contain a term that states when the lease agreement is in effect, who can occupy the property, and the conditions under which the lease can be ended. The length of a lease can range from as little as a month to as long as 40 or 50 years.
During a lease, you are the legal tenant of the property. You have the legal right to use the property as you see fit, and you must return the property to the same condition as when you occupied it. You are bound by the terms of the lease agreement.
Rent is the amount that is charged to use the property.
Why is lease vs. rent important?
Owning real property is different from renting real property. When you rent, you are not actually residing in the house. You are using the house as a base to carry out various business activities or for a vacation property. If you are like most people and own real estate, the most important reason to lease over rent is the security of knowing who you have to deal with if things go wrong. If you own a rental property, the most important reason to lease over rent is the flexibility and convenience of being able to make changes to the house without having to worry about being able to find a replacement tenant.
Pros of Lease
Easier ownership – Lease vs. buy property can seem like an overwhelming decision for some. With lease vs. buy property, you can try out both options and see which one feels more comfortable. You can also try out both options if you are looking to transition to owning in the future.
More flexibility – Lease vs. buy property allows you to decide how long the lease should be and how flexible you want the property manager to be.
Better appreciation – If you rent and then later decide to buy the property, you can appreciate the rental yield and the cash flow that comes with the property.
Longer term security – If you lease, you can plan for the long-term and ensure that the property has a long life span. With buy, you have little control and have to worry about the market crash and rising rental rates.
Cons of Lease
More work – When you lease, you are responsible for taking care of the property. This could mean doing day to day chores, mowing the grass, cleaning the house, and more. If you are able to hire a professional to do some of these jobs, you will save money. But if you are responsible for taking care of the property, you will have less time for enjoyable activities such as traveling, hiking, playing board games, etc.
Rising maintenance – Maintenance is expensive. If you are leasing, you will have to pay for regular maintenance such as mechanical, roof, plumbing, and electrical. With a lease vs. buy property, you can choose how much maintenance you want and then treat the property as if it was your own.
How to lease vs. buy property
The best way to decide whether leasing or renting is the better option for you is to decide what type of tenant you want to have on a long-term basis. If you are looking for tenants who will take your property for a long time, then leasing may be a better option for you. If you are willing to accept short-term tenants, then buying may be a better option for you.
Here are some things to keep in mind:
Find a rental property that meets your criteria. – You will want to make sure that the rent is reasonable, the property is in good condition, and there are adequate services available.
Obtain the correct paperwork – Make sure that you are familiar with the proper steps to take to lease or buy property.
Bring a friend – Make sure that you are comfortable working with contractors, ownership, and the rental process on a personal level.
Leasing vs. renting properties can be an interesting decision depending on your personal situation and goals. There are many benefits to both options and it is important to carefully consideration both lease vs. rent and decide which is best for you.