Hey everyone. In this video, we will talk to you a little bit about
net effective rent and what that means when you're searching for
rental listings here in New York City on https://www.streeteasy.com
We’re making this video today because recently StreetEasy made a change to how they display rent
for listings on their platform. Now just a quick refresher in terms of what net effective rent
actually means. In essence, net effective rent is the actual rent you'll pay if you factor in
any sort of incentive such as a free month or two that the landlord might be paying.
For example, if the gross rent is three thousand dollars on a 12 month lease
and the landlord is providing two months free the actual net effect of rent is 2500
so in terms of economics over the course of the lease you're going to pay 2500 a month.
Now functionally in most cases what that might mean is you'll actually pay that full 3000 for say
10 out of the 12 months and then perhaps in the final two months you won't have to pay the rent,
so the dollar amount that you pay each month varies and gyrates and might not be or won't
be the net effect of rent. But the net effect of rent is a good way to understand the economics
for you over the term of a lease for an incentive the landlord might be providing.
Now this is problematic for a few reasons when you're searching for rental listings. So for
example in this case the rent on the listing would say 2998 and it wouldn't reference the gross rent
anywhere a lot of people did not like this. The reason being is it's important to understand the
actual rent you might be paying each month as it relates to cash flow so as we mentioned the
net effective rent is not a rent you'll actually pay in many cases and the other thing as well is
when it comes to getting a free month or two what that might mean is basically when you want
to renew the lease in a sense you'll actually be prompted to renew it at the full gross rent.
So a lot of people don't like that the fact that although the net effect of rent might be the same
like in this case 2998 sounds same as 2999 but if you were to rent this apartment here
on the beginning of that potential second year you won't have to
sort of renegotiate with the landlord based on the presumption of you paying the gross rent.
In this case the renewal assuming there's no increase on the actual rent would be 2999.
So that's one of the reasons why on September 2nd StreetEasy made an announcement that they're going
to both display the gross rent as well as the net effective rent on all listings with concessions.
So we showed you an example in the search results here essentially showing the gross rent
and the net effect of rent but the important thing that we want to convey in this video
is the fact that when you're searching for listings on StreetEasy rental listings,
the actual net effect of rent is going to be what
shows up in the search results and is triggered by your search criteria. For example, in this case
we have done a search in the lower east side for up to three thousand and as you can see here the
pricing is going down in terms of the numbers but occasionally you're seeing a higher number
actually listed than what the what it should be and that's because you're seeing the gross rent.
But when we're filtering this it's actually filtering it by the net effective so in this case
that's a true rent right there two nine nine nine this one here two nine nine nine as well
but it's showing us that uh that actual gross rent. So in other words, when you're searching
for listings you don't have to worry about the distinction between
gross and net effective in terms of the economics the search results will be showing
you results based on the actual effective rent for the listings that might meet the criteria.
So as we scroll down here again you'll see 2999 2999 this one doesn't have any incentives
because there's no net effective and as we go down although the price steps up to 3270 we'll see as
well that 2998 is a net effective so it is going in this case having been sorted by most expensive.
So we hope you found this video helpful and just a quick note guys if you want to play around with
the math learn about net effective rent check out Hauseit’s net effective rent calculator. The
URL is up here at the top, and it allows you to in an interactive way actually figure out that
effective rent from gross rent. You can change the number of free months additional landlord
concessions you can also factor in moving expenses broker fees broker fee concessions and such.
So we hope you found the video helpful if you have any comments leave us a note below.