The Difference Between Lease and Rent: Is It The Same?

In the worlds of real estate, rentals, and property management, there are a lot of different keywords that you will want to have an understanding of to get your work done efficiently and accurately. Some of these words, like subletting, are very specific. Others are less specific and can be easily confused.

One thing that often comes up when discussing landlord terminology is the difference between lease and rent. Is lease rent and rent the same thing, or is there a difference that you should be aware of? If there is a difference, it’s important that landlords like you understand it and use the proper word in certain situations.

Today, we’ll look at this point as well as potential lease and rental agreement differences so that you can get a complete understanding.

A Table of Contents for Lease and Rent Difference

Are Lease and Rent Different?

Is lease and rent the same thing? Or are there important differences that you should be aware of?

While these terms are often used interchangeably, both lease and rent are words that represent different things. It is easiest to understand these differences when put into the context of lease and rental agreements.

Lease agreements are agreements to cover renting property for a specific, longer period of time. The terms of the lease cover the entire rental period, and they cannot be changed during that period. Lease agreements also do not automatically renew.

Rental agreements, on the other hand, cover renting a property on a month-to-month basis. While there may still be a full agreement signed, this agreement automatically renews every month and can be changed at that monthly turning point if needed.

Lease and Rental Agreements: Explained

All about Lease Agreements

Lease agreements are contracts that are signed to cover a longer rental period, usually starting at a minimum of six months. Most lease agreements cover a standard one- or two-year period when they are signed.

The most important thing that the lease documents is the monthly rent and the length of the lease. Neither of these things can be changed after the agreement is signed. Effectively, the lease agreement prevents landlords from raising the rent, and it prevents tenants from leaving before the lease period is complete.

Lease agreements do not automatically renew unless there is a specific clause in the original lease agreement that says it will do so. Usually, lease agreements are only valid for the original time period. Once it is over, tenants and landlords have the option to sign a new agreement with refreshed terms.

When this new agreement is signed, the terms can be changed. This includes the amount of rent. For this reason, many tenants prefer to sign longer leases to help lock in a lower price in areas where the rental cost is likely to increase.

All about Rental Agreements

Rental agreements, on the other hand, are not long-term contracts. Instead, these agreements are typically used to set up a month-to-month rental tenancy. The month-to-month agreement automatically expires and is renewed each month for as long as both parties agree to continue renewing it.

The stipulation and clauses in the lease may appear to be very similar to a standard lease. At the end of each month-long period, however, the tenant or landlord can request that changes be made to the lease agreement.

These changes can be made without violating the original agreement since it technically ends each month, but notice must still be given to make the changes.

Which is Right for Your Property?

Now that you know a little bit more about both lease agreements and rental agreements, you might be trying to figure out which one will work best for your properties. When it comes down to it, it might depend on what type of tenant you are looking for at any particular time, but it’s good to gain a sense of when each type of agreement makes sense.

Rental agreements allow you to set up a property for short term rentals. Some properties are unlikely to attract long-term renters due to location, size, or quality, so opening these properties to short-term renters instead can help you continue to turn a profit despite the properties’ shortcomings.

Additionally, short-term rental agreements are ideal for landlords working in areas that are on the up-and-up. When you use a short-term agreement, you can continue to adjust the rent to fit the area as needed. This, of course, is more beneficial to you than it is to a tenant, so you will want to keep that in mind.

Lease agreements, on the flip side, set you up for a long and guaranteed amount of income. By renting out for a longer and set period of time, you are guaranteeing the stability of receiving money from a tenant for that period of time.

Plus, tenants are usually more likely to want to sign a lease agreement rather than a rental agreement because it provides them some stability and guarantee that the rent won’t go up as well.

The Final Decision Is Yours

Ultimately, the final decision about which agreement type is right for you and your properties is up to you. It’s best to not lock into using one type of agreement forever, as every property and rental situation will have different needs.

Instead, keep templates for both types of agreements on hand. By knowing the lease and rental agreement differences and having these ready in your template stockpile, you can choose which one might better suit a particular tenant and work with them to make the agreement.

There is a difference between lease and rent, but that difference doesn’t have to become a problem for you if you use it to your advantage in rental situations!