Net Effective Rent Calculator

Base Rent per Month (BR): USD

Lease Term (Term): Months

Rent-Free Months (N): Months

Tenant Cash Allowance (TA): USD

Operational Costs Input Type:

Operational Costs per Month (OC): USD

Enable Area-Based Calculations?

1. What is the Net Effective Rent Calculator?

Definition: This calculator computes the Net Effective Rent (NER), the average monthly rent paid over a lease term, accounting for discounts like rent-free months, tenant cash allowances, and operational costs.

Purpose: Helps landlords and tenants evaluate the true cost of a lease, factoring in incentives and expenses, to make informed rental decisions.

2. How Does the Calculator Work?

The calculator uses the following formula:

Formula:

$ \text{NER} = \frac{12 \times \left[ \text{BR} \times (\text{Term} - \text{N}) - \text{TA} - \text{OC} \times \text{Term} \right]}{\text{Term}}$

Where:

$ \text{BR} $: Base rent per month (USD)
$ \text{Term} $: Lease term (months)
$ \text{N} $: Number of rent-free months
$ \text{TA} $: Tenant cash allowance (USD)
$ \text{OC} $: Operational costs per month (USD)

Steps:

Step 1: Input values. Enter base rent ($ \text{BR} $), lease term ($ \text{Term} $), rent-free months ($ \text{N} $), tenant allowance ($ \text{TA} $), and operational costs ($ \text{OC} $), either as a fixed amount or percentage of rent.
Step 2: Compute NER. Calculate the yearly NER using the formula, then divide by 12 for monthly NER.
Step 3: Optional area-based calculation. If enabled, divide NER by property area to get NER per m².

3. Importance of NER Calculation

Calculating NER is key for:

Lease Comparison: Allows tenants to compare leases by accounting for incentives and costs.
Budget Planning: Helps tenants understand the true cost of renting over the lease term.
Negotiation: Assists landlords in structuring competitive lease terms with appropriate discounts.

4. Using the Calculator

Example: For a property with $ \text{BR} = \$3,200 $, $ \text{Term} = 24 \text{ months} $, $ \text{N} = 1 \text{ month} $, $ \text{TA} = \$4,000 $, $ \text{OC} = \$256 $:

Step 1: Input values.
Step 2: Compute NER:
- $ \text{NER} = \frac{12 \times \left[ 3,200 \times (24 - 1) - 4,000 - 256 \times 24 \right]}{24} $
- $ = \frac{12 \times \left[ 73,600 - 4,000 - 6,144 \right]}{24} = \frac{12 \times 63,456}{24} = \$31,728 \text{ per year} $
- $ \text{Monthly NER} = \frac{31,728}{12} = \$2,644 $
Step 3: If area = 80 m², then:
- $ \text{NER per m² (yearly)} = \frac{31,728}{80} = \$396.60 \text{ per m² per year} $
- $ \text{NER per m² (monthly)} = \frac{2,644}{80} = \$33.05 \text{ per m² per month} $
Result: Monthly NER = \$2,644, Yearly NER = \$31,728, NER per m² = \$33.05/month or \$396.60/year.

5. Frequently Asked Questions (FAQ)

Q: How do I calculate net effective rent?
A: NER is calculated by accounting for base rent, lease term, rent-free months, tenant allowances, and operational costs, using the formula: $ \text{NER} = \frac{12 \times \left[ \text{BR} \times (\text{Term} - \text{N}) - \text{TA} - \text{OC} \times \text{Term} \right]}{\text{Term}} $. For example, with $ \text{BR} = \$3,200 $, $ \text{Term} = 24 $, $ \text{N} = 1 $, $ \text{TA} = \$4,000 $, $ \text{OC} = \$256 $, NER = \$2,644/month.

Q: Why is NER lower than base rent?
A: NER accounts for discounts like rent-free months and cash allowances, as well as operational costs, reducing the effective rent compared to the nominal base rent.

Q: How does area-based NER help?
A: Dividing NER by property area provides the rent per square meter, making it easier to compare properties of different sizes.