Gross Rent vs Net Effective: How a Free Month Changes the Math

A "free month" does not make the apartment cost the advertised rent. Gross rent is the number on the lease. Net effective rent is that number after you spread a concession across the term. They answer different questions, and listing sites mix them on purpose.

The arithmetic

Take a hypothetical one-bedroom at $5,000 a month on a 12-month lease, with one month free. You pay $5,000 eleven times, which is $55,000 for the year. Divide by 12 and the net effective rent is about $4,583. The gross rent is still $5,000. Renewal, the 40-times income test, and a guarantor's obligation are usually calculated on gross, not on the net figure in the ad.

Two months free on that same hypothetical lease is $50,000 over 12 months, or about $4,167 net effective. The check you write in month two is still $5,000. If you need the concession to afford the apartment, you cannot afford the apartment on the month the concession ends.

Where people get burned

The free month is often the first month or the last month, not a discount on every payment. Your move-in cash and your monthly cash are different numbers. Ask which month is free, whether the concession survives an early move-out, and what the rent is at renewal. A concession is a deal on this term. It is not a promise about the next one.

Also compare apartments on the same basis. A $4,800 gross rent with no concession can be cheaper in real monthly cash than a $5,200 gross rent with one month free, and it is almost always the cleaner renewal. Net effective is useful for comparing this year's total cost. It is a bad number to budget from.

What we will not do here

This article does not say The Anthem is offering a free month. Concessions change by unit and by week. The listing is the source, and if the listing does not state a concession, there isn't one to assume. Ask the leasing desk for the gross rent, the term, and any concession in writing before you compare two apartments.

Look at current availabilities and read the rent as the monthly charge, then schedule a tour or call (212) 684-3222 and ask what you would actually pay in month one and month two.