About the Net Effective Rent Calculator
Net effective rent is the average monthly rent you actually pay over a lease once free months and other concessions are spread across the whole term. Landlords in competitive rental markets often advertise a “net effective” price — for example “$2,750 net effective, 1 month free on a 12-month lease” — while the lease itself shows a higher gross rent of $3,000 that you pay in 11 of the 12 months.
Enter the gross monthly rent, the lease length, the number of free months, any one-time landlord concession (a move-in credit, gift card or allowance) and any one-time fees you pay, such as a broker fee. The calculator shows the net effective monthly rent, the total you will pay over the lease, your savings compared with paying gross rent every month and the effective discount. For commercial space, enter the square footage to get net effective rent per square foot per year.
Remember that renewals are usually priced from the gross rent, not the net effective figure, so a big concession can mean a large jump in your second year. Compare apartments or offices on net effective rent, but budget for the gross amount in the months you actually pay.
With the default inputs, the net effective monthly rent is $2,750.00. Change any value above to recalculate instantly.
How to use the net effective rent calculator
- 1Enter the gross monthly rent written in the lease.
- 2Enter the lease length and the number of free months.
- 3Add any one-time landlord concessions and any fees you pay.
- 4For commercial space, enter the square footage.
- 5Compare listings on net effective rent and budget for the gross rent at renewal.
Formula and method
Total paid over the lease is the gross monthly rent times the months you actually pay, minus any one-time landlord concessions and plus any one-time fees you pay. Dividing that total by the full lease term spreads the free rent and fees evenly over every month, giving the net effective rent.
Savings compare the total with paying gross rent for the whole term, and the effective discount is savings as a percentage of that full-gross amount. For commercial leases, net effective rent per square foot per year is the monthly net effective rent × 12 ÷ the leased area. The calculation does not discount future payments for the time value of money.
- G
- Gross monthly rent stated in the lease
- T
- Lease term in months
- F
- Free months
- C, Fees
- One-time landlord concessions and tenant-paid fees
Worked examples
$3,000 apartment with 1 month free on a 12-month lease
You pay $3,000 for 11 months, $33,000 in total. Spread over 12 months that is a net effective rent of $2,750 — an 8.33% discount from the gross rent, worth $3,000 over the lease.
13-month lease, 2 months free, tenant pays a $5,040 broker fee
Eleven paid months at $4,200 is $46,200; adding the $5,040 broker fee brings the total to $51,240. Over 13 months that is about $3,941.54 a month, so the broker fee wipes out more than half of the value of the two free months.
5-year office lease with 4 months free and a $20,000 allowance
Fifty-six paid months at $10,000 is $560,000, less the $20,000 cash allowance, for $540,000 over 60 months. Net effective rent is $9,000 a month, or $54 per square foot per year on 2,000 sq ft, compared with $60 gross.
Frequently asked questions
What is net effective rent?+
Net effective rent is the average monthly rent over a lease after concessions such as free months are spread across the whole term. A $3,000 apartment with one month free on a 12-month lease has a net effective rent of $3,000 × 11 ÷ 12 = $2,750.
What is the difference between gross rent and net effective rent?+
Gross rent is the amount written in the lease and paid in each non-free month. Net effective rent is lower because it averages in the free months. Your monthly payments are the gross amount; net effective rent is for comparing deals.
How do I calculate net effective rent?+
Multiply the gross rent by the number of months you pay, subtract any one-time landlord concessions and add one-time fees you pay, then divide by the total number of months in the lease.
Will my rent go up at renewal after free months?+
Usually, yes. Landlords typically base renewal offers on the gross rent in the lease, not the net effective rent, and free months are often not repeated. Expect your monthly payment to stay at least at the gross amount.
Is net effective rent used in commercial leases?+
Yes. Commercial landlords and brokers compare deals on net effective rent per square foot per year, after free rent, tenant improvement allowances above standard, and other concessions are spread over the lease term.