What does it mean when an apartment listing says “net effective rent”?
Apr 18, 2023 brooklyn,brooklyn real estate,brooklyn realty,Brooklyn Renters,brooklyn renters agent,rent price,rental market,rentals,renting in brooklyn
You might find a listing that says “net effective rent” when searching for that perfect Brooklyn apartment. What does this mean? Is the price listed the price I pay? How is it calculated? We have all your answers below.
What is net effective rent?
Before we explain the definition, let’s understand two other real estate terms that will come in handy.
The first is gross rent, which is the amount of rent stipulated in a rental lease. When you sign a lease, you agree to pay a certain amount each month, and the combined amount of all monthly rental payments is your annual gross rent. (Bankrate)
The second is concessions. A concession is any discount or adjustment made to the rent, a security deposit fee, or other fees paid by you, the tenant, to the landlord.
The definition of net effective rent is the total gross rent for the entire lease period divided by every month in the period.
For example, when a landlord offers a concession, like the first month free, and the rent is advertised as $3,600 for a 12-month lease. You calculate the net rent by multiplying $3,600 by 11 months (because you get one month free), which is a total of $39,600. You then divide the total by the number of months the lease term will be; in this case, it’s 12 months. The total net effective rent is $3,300.
If you want to simplify this calculation, you can plug the numbers into this calculator.