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

By Emily Myers | March 17, 2022 - 4:00PM 

Net effective rent reflects a discount factored in and can be different from what you actually end up paying each month.

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When you search New York City rental apartment listings, you may be confused by the term “net effective rent,” which makes it hard to figure out how much rent you actually need to pay.

That's because when landlords offer concessions like a month or two of free rent to encourage you to sign a lease, they often will advertise the apartment at the net effective rent, which means the concession is being factored into the advertised price, giving you a discount.

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.

Note that some landlords will want you to pay the higher gross rent on a monthly basis, which in the example above is $3,600, and then give you a "free" month at the beginning or end of your lease.


[Editor’s Note: A previous version of this article ran in April 2021. We are presenting it again with updated information for March 2022.]


Need to figure out the gross rent for an apartment? To calculate your actual monthly payments you take the total sum of the concession, divide it by the number of months on the lease, and subtract that amount from the gross rent. Too confusing? You could always use Brick Underground's calculator.

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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?.

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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.

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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.

What usually happens is the landlord takes the gross rent each month and the freebies are applied to the final month or months of the lease, depending on the arrangement. In other cases the rent is amortized over the course of the year so you pay the gross rent minus a prorated portion of the concession.

In other words, while some landlords will spread out the discount for the duration of the lease, most will let you skip a month of rent, usually at the end of the lease. Either way, you'll need to budget accordingly.

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.  

Renters who are new to New York are often unfamiliar with the differences between gross rent and net effective rent. A few years ago a StreetEasy survey found that 40 percent of renters were confused by the term net effective rent, prompting them to adjust the presentation of their listings. There’s now more transparency about the concessions with the lease length and gross rent clearly shown, when they are applicable.

Keep in mind that when you search for an apartment on StreetEasy, and other sites for that matter—your results will pull in listings when either the net or gross rent fits your criteria.

Most importantly, when you renew you'll be negotiating (and facing rent increases) based on the gross rent, not the discounted net effective rate. This has been a big shock to many renters who got deals during the pandemic and received lease renewal notices with rent hikes of as much as 30 to 60 percent.

 

Brick Underground articles occasionally include the expertise of, or information about, advertising partners when relevant to the story. We will never promote an advertiser's product without making the relationship clear to our readers.
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