What does 'net effective rent' mean? Here's how to calculate your real monthly rent
- Net effective rent is what you pay when a free month is factored into your rent
- If your rent goes up at renewal time, the increase will be applied to the gross rent
When landlords offer concessions like a month or two of free rent to encourage you to sign a lease, they often advertise the apartment at the net effective rent.
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When you search New York City rental apartment listings, you’ll often see the term “net effective rent,” advertised as well as the higher “gross rent.” This can make it difficult to figure out how much money you’ll hand over to your landlord each month.
When landlords offer concessions like a month or two of free rent to encourage you to sign a lease, they often 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.
[Editor’s Note: A previous version of this article ran in March 2022. We are presenting it again with updated information for March 2023.]
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 rent calculator.
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?.
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.
Some landlords 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. This is typical and it has benefits when—and if—you renew your lease, because any rent increases won’t come as such a shock. When your rent is raised—by say 5 percent—it is based on the gross rent rather than the net effective.
But sometimes the discount is included over the course of the year, so you pay the net effective rent for the duration of the lease. This can be something you ask for at lease signing when there is a problem with the apartment or demand for apartments is low (which is not the case now).
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 The Agency. 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, The Agency 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 The Agency are delightful to deal with.
Renters who are new to NYC are often unfamiliar with the difference 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 make what renters pay clearer in listings. There’s now more transparency about concessions, with the lease length and gross rent clearly shown when 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 was a big shock for many renters who got deals during the pandemic and then received lease renewal notices with rent hikes of as much as 30 to 60 percent.
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