In this video, we will show you how to use the Net Effective Rent Calculator
available at Hauseit.com. The purpose of the calculator is to help understand the
difference between gross rent and net effective rent. When it comes to rental
property, as you may notice when you search for listings online oftentimes
you see relatively low rent and if you read the description you'll then hear
that they're actually putting the net effective rent on the listing instead of
the gross rent. So this calculator helps you cut to the chase and figure out what
the actual rent will be. And if it may be helpful for us, just to go over quickly
the gross rent is what your actual rent will be on the lease contract. So if you
know the gross rent is 85 hundred dollars a month ,you will be paying
eighty five hundred dollars a month for the months where you have to pay the
rent. Now the reason why net effective rent is lower than gross rent is because
usually landlords offer say a month free or half a month free or something
Whereby you don't pay for a particular month or some period of time so if you
redo the monthly average of the rent that you'll pay over the term of the
lease, it's gonna be lower than the gross rent. But just to be clear, even if then
that effective rent is lower than the gross rent for the months where you're
not receiving a landlord concession, you are gonna be paying cash flow wise the
full gross rent. So let's look at a couple examples, here we have a unit in
Prospect Heights out in Brooklyn and you'll see that the rent is forty eight
sixty three. Now customarily, whenever we see a listing that has a very unusual
number for the rent something that's not five hundred or 750 or six hundred or a
thousand, it is a possible indication that there's some sort of
landlord concession going on and you might be seeing than that effective rent
Here's another example seven thousand seven hundred and ninety one dollars a
month. Again, a very very unusual number which means it almost surely is a net
effective rent instead of a gross rent so going back to the first example, if we
scroll down here we're gonna see immediately currently offering two
months free on lease is starting before January 15. Go further down, it will tell
us that the listed rent is net effective rent based on a gross rent of fifty
eight thirty five and two months free. So let's use the calculator to get from
fifty-eight thirty five to forty eight sixty three. So the first thing we're
going to do is we're gonna put the gross rent of fifty eight thirty five we're
gonna put a lease term of twelve months and in this case they've mentioned that
there are two months free.So we can put two for the number of three months and
as you'll see here it's giving us a net effective rent of forty eight sixty to
forty eight sixty three. If you round up and forty eight sixty three is the rent
on the listing so clearly that is the net effective run. If you'd like we can
do another example. Let's take a look at this unit this is a rental building in
the Lower Eastside the Garment District former Garment District of Elias Lower
Eastside. So in this case, if we look down towards
the bottom again we see the disclaimer here price is net effective with one
month free on an eighteen month lease. So the other thing they would say here is
half month free for every six months. The tenants sign on for so in this case
let's put the gross rent in the calculator eighty five hundred
and in this case why don't we do a we could do an 18 month lease or we could
do a 24 month lease if we do an 18 month lease? We're gonna put one month free and
if we do a 24 month lease we're gonna put 1.5 months free because they're
giving an extra half month for every six months. So let's just start with an
18-month lease and one free month and you'll see here that the net effect of
rent is technically 8020 eight dollars. So believe it or not, this this listing
it this advertised price is actually incorrect and you know it is possible
that when they did this listing, originally maybe they were more
desperate on the landlord side and perhaps they were giving one free month
for every 12 months of a lease term because if we use that as the lease term,
we're getting back seven seven nine to figure that we're seeing right here or
seven seven nine one. So clearly, in this case this is a buyer beware situation
because the actual rent is literally wrong on the listing so the calculator
can help you cut to the chase figure out what's going on here. But just to
reiterate, if we go back to this listing here which is correct the the average
rent, you would pay over the term of the lease is four thousand eight hundred and
sixty three dollars a month. But what it really means is you would actually pay
five thousand eight hundred and thirty five dollars a month for ten months and
then in the final two months you would not have any rent to pay at all. So in
the lease contract itself, it will say fifty-eight thirty-five. It probably will
not even mention forty 863 and then when it comes to a renewal of the lease in
theory the increase or any any increase in the rent shouldn't and really will
probably be based on the gross rent so it's just something for you to keep in
mind. But the truth is that if the net effective rent is
the gross friend, you you actually are saving money not with standing the fact
that the renewal isn't probably based on the higher rate. And the fact that you're
paying a higher cash flow amount for some of the months, you still do save money on
average if the landlord is offering some form of a concession. So going back into
the calculator on the right hand side, here it actually helps show you the
breakdown of the calculations so it tells you the the annual net effective
rent and also it will tell you the net effective rent on a monthly annual basis
including fees. So if we add for example a broker fee which can be up to 15% in
some cases, you can see that the net effective rent on a monthly basis goes
from seven seven nine one to nine thousand and sixty six dollars. So I mean
the rent literally goes up by over a thousand dollars a month so there is one
way for you to reduce your rental broker fee. You can request a rental broker fee
credit so if you are interested in learning more about that feel free to
click the link here or go to the rentals tab and click on rental broker fee
rebate. If you have any questions about the calculator leave us a comment below
we hope it's helpful and you know we wish you the best of luck as you
navigate what can be at times very difficult and confusing and challenging
rental markets out there in the city especially in in New York City