How to Calculate Net Effective Rent on an Apartment

by Mike Keenan ; Updated June 29, 2018
How to Calculate Net Effective Rent on an Apartment

Many real estate companies and apartment complexes will offer a range of incentives to encourage people to lease an apartment from them. These bonuses may take the form of free rent for a period of time, a cash bonus or other incentives. If you want to compare the effective rent costs of multiple apartments, you need to take into consideration these incentives, because they may make an apartment with a higher stated rent actually have a lower net effective rate than an apartment with a lower stated rate.

Research Rent Amounts

To get the full rent for each apartment you're considering renting, you'll need to spend time getting as much information as possible on the rent cost, as well as all incentives and discounts. This could include free months, gift cards to local establishments, cash back, or gift card offers given merely for considering a particular apartment. Use various websites to check rent rates and offers and call around when necessary to double-check any offers an apartment complex might not yet be advertising on these sites. Often apartment complexes will advertise these rates on the main page of their individual websites.

Calculate Monthly Rent

Once you have an apartment complex's full offer, you can begin calculations. Add the value of any promotions or discounts for the term of the apartment rental. For example, if the offer includes one month of free rent and $50 cash, and the cost of rent equals $450, add $450 plus $50 to find the total discounts equals $500.

Multiply the monthly rent by the number of months in the term of the lease to find the total rent paid. For this example, if the lease equals one year, multiply 12 by $450 to find the total rent equals $5,400. Subtract the discounts from the total rent to find the net rent. In this example, subtract $500 from $5,400 to get $4,900 in net rent. Divide the net rent by the number of months to find the monthly net effective rent on the apartment. In this example, divide $4,900 by 12 to find the monthly net effective rent equals $408.33.

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Compare Offers

Perform the same calculation for multiple apartment complexes to get the best offer. This will take extra time, but you can get the best deal by shopping around. You'll likely also take into account other features, such as security gates, amenities and proximity to your workplace and local restaurants and shops.

About the Author

Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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