Every property owner will collect rent, landlords are not excluded. The big part is in deciding how you will collect rent.
While some might prefer to collect rent annually, others might prefer monthly.
The same thing applies both to the tenant. It’s like two sides of the same coin.
At some point, real estate investors would have to consider choosing a rental strategy that works best for them.
In this blog post, we will discuss the pros and cons of yearly and monthly rents and how it helps property owners, real estate investors, tenants, and landlords.
Monthly Rent Payment
This simply means rent that is collected in a month; exactly what the name is. Landlords would collect monthly rents on the first day of the month either via cash, cheque, or any other agreed method between both parties.
Yearly/Annually Rent Payment
This simply means rent that is collected for a year at once. Most landlords in Nigeria prefer to use this style of payment, some even go ahead to ask for a down payment of 2 years.
Instead of planning to pay rent monthly, the tenant pays for a full year at the time of signing the lease document.
When the year ends, the tenant can decide to either pay for a full year again or try to strike a deal with the landlord.
Advantages of Monthly Rent Payment
While this payment plan is not popular in Nigeria, some landlords might find this very useful for solving big needs such as;
1. Flexibility
For landlords that might always want to have cash lying around, this might seem like a better option for them.
Not all tenants have the money to make a large down payment.
For tenants, this reduces the problem of having to pay a huge lump of money at once.
In most cases, they always feel the blowback of paying such a huge amount of cash.
2. Steady Flow of Cash
In monthly rent, the landlord is sure of a steady flow of cash. This can easily help him to fix any issues that might come up with his rental property.
3. Easily increase rent
Landlords can easily increase their rents unlike their counterparts that would have to wait for a year to increase the house rent.
With this option, they don’t have to be tied down by 365 days to wait to increase the rent.
Disadvantages of Monthly Rent Payment
1. Too much work
This is a lot of work on both the landlord and the tenant. The landlord has to always be on his toes to check with his tenant for the monthly rent which can be tiring if the tenant isn’t available. This can also lead to late payment.
The tenant would always have to put the monthly rent into the budget and pay every month.
2. Easy quick notice
It is very easy for the landlord to serve a quick notice to the tenant because the signed agreement has a short time span.
On the tenant’s part, he would have to move or live with the worry of being served a quick notice at anypoint.
Advantages of Yearly Payment
Landowners in Nigeria prefer to collect rent on a yearly basis as it favors them.
1. More money upfront
Landlords in Nigeria prefer this system of payment as they usually receive a huge amount of money as the tenant is moving in.
They can easily use this to handle other duties that might be required of them.
2. The tenant can’t just walk away after few months
It’s easier for a tenant to easily walk away after a monthly payment but a yearly payment is a different situation.
With a year’s worth of payment, no tenant can just up and leave except in a mutual agreement with the landlord.
3. Longer time for a quick notice
If a tenant is served a quick notice, he has till the year is over before leaving the property than when compared to a monthly rent payment.
4. Peace of mind
Most tenants would be happy to have a place secured for a year. You can run out of everything but you’d have a house where you can lay your head and make your bed.
Disadvantages of Annual Rent
1. Low Financial Flexibility
Tenants can find it difficult to come up with a huge sum immediately for a house. Some people get into huge debts because they do not make adequate plans before making a yearly payment.
2. Moving out can be difficult
Things happen in life. As a tenant, you might need to leave your city for a new city or maybe travel outside the country for a long time.
Getting a refund can be a major issue as landlords don’t always do refunds.
It is still possible to get a refund but the likelihood is low plus you’d need to discuss and reach an agreement with the landlord.
Final Thoughts
Collecting monthly rent is not common in Nigeria as both tenants and landlords prefer a yearly payment structure.
The landlord does not have to chase or breathe down the tenant’s neck every month as he receives his pay in full.
Ready to take the next step in your investment journey? At GZ Realty, we specialize in connecting US citizens and African Americans with prime real estate opportunities in Nigeria. Whether you’re looking to invest in residential properties, commercial spaces, or land, we’ve got the expertise and local knowledge to help you make the most of the booming Nigerian market. Explore the potential of Nigerian real estate with GZ Realty, and discover how we can help you diversify your portfolio with confidence.
Learn more about our services and start your investment today!