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What does 'net effective rent' mean? Here's how to calculate your real monthly rent

Landlords often offer concessions like a month or two of free rent to encourage you to sign a lease, especially in pricey new developments.

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Landlords often offer concessions like a month or two of free rent to encourage you to sign a lease, especially in pricey new developments. When they do, you may see the term "net effective rent" in the listing. But what does it really mean for your wallet? The answer involves a bit of math.

To calculate the net effective rent, you take the total amount of concession and divide it by the term of the lease, then deduct that amount from the monthly asking rent. Or you could use Brick Underground's calculator, below.


[Editor's note: An earlier version of this post was published in May 2018. We are presenting it again in case you missed it.]


Usually, a concession is one or two months of free rent, however Elizabeth Kee, a broker at CORE, is seeing concessions like four months free on an 18-month lease or eight months free on a three-year lease.

Brick Underground's

Gross Rent Calculator

What's this?

Some New York City landlords offer a free month (or more) at the beginning or end of a lease. The advertised rent is the net effective rent.  The net effective rent is less than the amount you will actually have to pay --- known as your gross rent --- during your non-free months.

Brick Underground's Gross Rent Calculator enables you to easily calculate your gross rent, make quick apples-to-apples comparisons between apartments and avoid expensive surprises. All you'll need to figure out your gross rent is 1) the net effective rent, 2) the length of your lease, and 3) how many free months your landlord is offering.  [Hint: Bookmark this page for easy reference!]

To learn more about net effective versus gross rents, read What does 'net effective rent' mean?.

Per Month
Months
Months

If the landlord is offering partial months free, enter it with a decimal point. For example, 6 weeks free rent should be entered as 1.5 months.

Per Month

Net effective rent means the concession "is being factored into the advertised price," says Sarah Rose Katz, an agent at Compass agent. "For example, if an apartment is $3,600 and the landlord is offering a free month of rent as a concession [on a 12-month lease], then the net effective rent will be $3,300." 

The advertised price is what gets your attention, and the potentially tricky thing to keep in mind here is that typically, you won't be paying the net effective amount each month, but rather the higher "gross" rent, which will be the rent listed on the lease.

"Every landlord is different, but typically, either the second or last month is free and the gross rent is paid each month before that," says Eugene Litvak, a broker at Compass. "Though in some cases, we have seen the rent amortized over the course of the year."

Pro Tip:

To rent an apartment in New York City, most landlords require you to earn an annual salary of at least 40 to 45 times the monthly rent. If you don't—or if you’re an international employed person, self-employed, non-employed with assets, retired, or an international student or US student—you’ll need to find a guarantor for your lease who earns at least 80 times the monthly rent and lives in New York, New Jersey or Connecticut. Or you can turn to Insurent Lease Guaranty.  Accepted at more than 4,700 buildings across the city representing over 475,000 apartments, Insurent Lease Guaranty is a quick and easy way to get the apartment you want. Click here to learn more.

In other words, while some landlords will spread out the discount for the duration of the lease, most will simply have you skip a month of rent up front or at the end of the lease, so you''ll want to plan your budget accordingly. 

Also, when it comes time to renew, you'll be negotiating (and facing rent increases) based on the gross rent, not the discounted net effective rate. 

Pro Tip:

Pocketing a free month's rent is a hollow victory if you have to choose between overpaying or moving when your lease is up. For expert help finding buildings offering the most valuable concessions, negotiating with landlords and leasing agents, and generally getting the best possible deal, put your search into the smart and capable hands of Triplemint. A tech-savvy real estate brokerage founded by a pair of Yale grads in response to the frustrating apartment-search experiences of classmates and colleagues, Triplemint will charge a broker's fee of 10 percent of a year's rent on open listings instead of the usual 12 to 15 percent if you sign up here.  Bonus: The agents at Triplemint are delightful to deal with.