Real estate can be a fantastic investment, giving you a steady stream of mostly passive income. However, it does mean letting a virtual stranger have access to one of your most valuable assets, so you should always sign a lease or rental agreement before letting a tenant move in. While both contracts outline the right and responsibilities of each party, there are important differences every landlord should know.

3 Differences Between Leases & Rental Agreements

1. The Duration of the Contract

Leases give tenants a right to the property for a specified period, typically 12 to 24 months. If you want the tenant to leave before the lease has expired, you must have grounds for an eviction. Rental agreements, on the other hand, only cover a 30-day period, and usually automatically renew unless you or the tenant give written notice.

2. Reasons for Terminating the Contract

To terminate a lease, you must be able to show that the tenants have violated the contract, either by creating a disturbance, failing to follow the rules, or participating in criminal activity. A rental agreement can be ended at any time for any reason by either party, which makes them ideal for short-term real estate rentals.

3. Freedom to Change the Terms

A lease provides the security of long-term tenancy, but it also locks in the tenant’s rental rates and other fees. Even if your costs go up, you’ll have to wait until the lease expires to raise the rent or service charges. A rental agreement is subject to renegotiation at any time, giving you more freedom to raise the rents if your expenses or market conditions change.

If you own a rental property anywhere in Tennessee’s Hamilton County or the surrounding areas, let Bridge City Realty, LLC handle the details. With their extensive real estate expertise and reliable property management services, their team will eliminate your stress and maximize the return on your investment. To speak with a real estate agent today, visit their website or call (423) 648-6242, and follow their Facebook for more news and updates.