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What is the real monthly rent with free months?

Spread free months and landlord concessions over the lease to find the net effective rent, the discount and the total you will actually pay.

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Net effective monthly rent

$2,769

Budget for the gross rent: it is what you pay in the months that are not free, and what renewals are usually based on
Discount on the gross rent
7.7%
Total paid over the lease
$36,000
Savings over the lease
$3,000

This calculator gives estimates for education and planning. It is not investment, tax or legal advice; for decisions about your own situation, talk to a qualified financial professional.

What net effective rent means

Landlords often attract tenants with concessions, such as one or two months of free rent, without lowering the listed rent. The net effective rent spreads those concessions over the whole lease, to show what you really pay per month on average:

Net effective rent = (gross rent × paying months − other concessions) ÷ lease months

The listed rent is called the gross (or face) rent.

Example

An apartment is listed at $3,000 a month with one month free on a 13-month lease. You pay 12 × $3,000 = $36,000 over 13 months, so the net effective rent is $36,000 ÷ 13 = $2,769 per month, a discount of 7.7%.

Why the gross rent matters

  • Monthly budget: in most leases you pay the full gross rent in every month that is not free. Some landlords spread the concession instead, so check how your lease applies it.
  • Renewals: increases at renewal are usually based on the gross rent, so the effective discount can disappear in the second year.
  • Comparing listings: some listings show the net effective figure in large print. Compare apartments on the same basis.
  • Income requirements: landlords often require an income of about 40 times the monthly gross rent per year in New York, for example.

Other concessions

Landlords may also pay a broker fee, moving costs or offer gift cards. Enter one-time amounts in the concessions field to include them in the average.

Commercial leases

The same idea is used for offices and retail space, where incentives such as rent-free periods and fit-out contributions can be large. Investors and appraisers compare the net effective rent with market rents to value a building.

Tips

  • Ask whether the free month is at the start, at the end or spread out.
  • Read the renewal clause and any early termination penalty: leaving early can mean repaying the concession.
  • Negotiate: when vacancies are high, a longer free period or a lower gross rent are both possible.

Frequently asked questions

What is net effective rent?

The average monthly rent once concessions such as free months are spread over the lease: total rent paid divided by the number of months in the lease.

How do I calculate one month free on a 13-month lease?

Multiply the rent by 12 and divide by 13. At $3,000 a month, the net effective rent is $2,769.

Do I pay the net effective rent each month?

Usually not. You typically pay the full gross rent in the paying months and nothing in the free month, unless the landlord spreads the concession. Check your lease.

Is the renewal based on the gross or net rent?

Most renewals start from the gross rent, so the effective discount often disappears at renewal. Ask before signing.

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Results are estimates provided for information purposes. They do not replace professional advice.

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