Net Effective Rent Calculator
Calculate the true monthly cost of a lease considering free rent periods. Enter your base rent, lease duration, and any free months offered.
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Understanding Net Effective Rent
What is Net Effective Rent?
Net Effective Rent (NER) represents the average monthly rent cost when factoring in free rent periods offered in a lease. It's calculated by spreading the value of free months over the entire lease term.
Calculation Formula
The formula for Net Effective Rent is:
NER = (Monthly Rent × (Lease Term - Free Months)) / Lease Term
Key Components
- Base Rent: Original monthly rent amount
- Lease Term: Total duration of lease in months
- Free Months: Number of months with waived rent
Real-Life Examples
Example 1: Standard 12-Month Lease
Scenario: $2,000/month rent, 12-month lease, 1 free month
Calculation: (2000 × (12 - 1)) / 12 = 2000 × 11 / 12
Result: $1,833.33/month NER
Example 2: Long-Term Lease
Scenario: $3,500/month rent, 24-month lease, 3 free months
Calculation: (3500 × (24 - 3)) / 24 = 3500 × 21 / 24
Result: $3,062.50/month NER
Example 3: No Free Months
Scenario: $1,800/month rent, 6-month lease, 0 free months
Calculation: (1800 × (6 - 0)) / 6 = 1800 × 6 / 6
Result: $1,800/month NER
Example 4: High Concession Lease
Scenario: $4,200/month rent, 18-month lease, 4 free months
Calculation: (4200 × (18 - 4)) / 18 = 4200 × 14 / 18
Result: $3,266.67/month NER
Example 5: Short Lease
Scenario: $1,500/month rent, 3-month lease, 1 free month
Calculation: (1500 × (3 - 1)) / 3 = 1500 × 2 / 3
Result: $1,000/month NER
Frequently Asked Questions
1. What's the difference between gross rent and net effective rent?
Gross rent is the stated monthly amount, while NER reflects the actual average cost after concessions.
2. Does NER affect my actual monthly payments?
Yes - while you might pay full rent most months, NER shows the true average cost over the lease term.
3. Can free months be distributed throughout the lease?
This calculator assumes consecutive free months. Actual distribution may affect cash flow but not NER.
4. How does lease length impact NER?
Longer leases with same free months have lower NER as concessions are spread over more months.
5. Is NER the same as discounted rent?
No - NER is an average, while discounted rent would reduce each month's payment.
