What is Net Effective Price?

The Net Effective Price is the monthly rent paid by a tenant to the landlord after factoring in free rent incentives included at lease signing. The term is common when searching for apartments for rent in NYC, especially during the off-peak winter season when landlords increasingly offer rental incentives. You can find a deeper discussion of net effective rent on our rental guide.

Here is a simple example. When a landlord is asking for $3600 monthly gross rent, but is offering 1 month free on a 12 month lease. The net effective rent is the gross rent * (12 months – 1 free month) / (12 months). In this case, $3600 * 11/12 = $3300 net effective.

Net effective pricing is useful for comparing rent in a building offering renter incentives to a building that is not. However, keep in mind the net effective is not guaranteed after the initial lease period – in fact without further negotiation, you can expect to pay the gross rent after the initial lease period.

 


 

Also, not all net effective calculations are 1 month free on 12 months. This week’s inventory from the 2 Gold Street, a popular financial district high rise, has 3 different net effective structures in the fine print! You get 1 month free on 12 for a studio, 1.5 months free on a 2 or 3 bedroom, except one listing, unit 5012, offers 2 months free on a 16 month lease. In every case, the “rent” column shows the net effective already, so to compute your gross rent at renewal, you would need to do the math backwards!

Lee Lin
Lee Lin
Lee is a data geek from MIT who spent years at quantitative hedge funds cranking out models to explain and predict financial markets. Real estate has always been a big part of Lee's life. He grew up helping out at his parents' Jersey Shore motels, became a landlord his first year out of college, analyzed mortgages on a fixed-income trading desk, and acquired a New York real estate license. At RentHop, he combines his nerd talents and real estate knowledge to constantly tweak the secret HopScore. He currently lives near Bryant Park and his favorite restaurant was Cafe Zaiya (now known as Tomiz).

You May Also Like

Summer Decorations For Your Apartment

Summer is here to stay, which usually means a beach vacation, frozen margaritas, and chilling in a pleasantly decorated space. But, not everyone has...

10 Things to Check Before Renting an Apartment

Finding a new apartment is equally exciting as it is nerve-wracking. In places like New York City, renters only have a few weeks to...

The Hidden Waterfalls of New York City

New York City isnโ€™t just a huge, concrete jungle. Behind the bustling traffic and tall skyscrapers, are both natural and man-made hidden escapes. What...

Recent Articles