What You Should Know About One Month Free Rentals
When you’re looking for a place to live, it’s hard not to be seduced by monthly offers of free rentals, gift cards, and other rental perks. But these deals often have hidden costs.
Let’s say you’re looking for an apartment for $ 1,500 a month. As you go through the listings, you notice one thing: It’s $ 1,500 a month and comes with one month of free rental. Sounds good, right? Differently. As Rhonda Kaisen of The New York Times explains , you are shown a “net effective price,” which means that the rent you see in your ad is not something you actually pay every month. The “free month” rental credit is usually applied to the last month of the rental, and the advertised rental value takes into account the “savings” you will receive from that “free” month of rent. In fact, you will pay more per month, or the so-called “gross rent”. (Why are landlords doing this instead of just offering lower rents? Having a higher registered “gross” rent helps them do well with lenders, even if they throw expensive freebies to make it work.)
You see, a $ 1,500 apartment with a monthly free rent is actually $ 1,645 per month. You simply pay for that “free” month for 11 months instead of paying it at that time. It’s not necessarily a bad deal – it can help you create a great financial cushion – but it’s not the incredible deal homeowners are about to make. But the deal isn’t the problem. The thing is, these deals could suck people into renting apartments below par (“I don’t like this place, but this free month of rent …”) or catch tenants off guard with higher than expected monthly costs that end up place a heavy burden on your budget.
To make matters worse, homeowners sometimes raise rents for these apartments, but increase the gross rental rate instead of the advertised net effective rate that initially attracted you. So, if you rent this apartment with a net effective rate of $ 1,500, your landlord can raise your rate based on a total of $ 1,645. After a year at this location, if the landlord raises the rent by $ 100 a month, you could suddenly pay about $ 1,800 a month for a one-time advertised “$ 1,500” apartment (of course, they could raise the rent as much as they want.) even from a lower starting point, but landlords tend to prefer a more gradual increase, which means that starting a higher rate can make a big difference in the long run.)
When signing one of these deals, also watch out for the fine print, which requires you to sign a two-year lease that will pay you a higher gross rent for the second year, without a “free month.” Given this time. Not exactly a super bargain.
That being said, as Brick Underground’s Lucy Cohen Blatter points out , incentives aren’t necessarily all that bad. They offer tenants a discount they might be interested in, and incentives often leave apartments full so landlords don’t have to raise their rent to pay off. Just make sure you always read the fine print before signing your lease, and don’t be afraid to negotiate things like a free extra month, lower deposit, or covered utilities. (If a landlord offers incentives such as a free month of rent, chances are he’s willing to negotiate pretty much anything other than the actual gross rent, so don’t hesitate.) However, depending on your preference, you might be better off paying a flat bet for 12 months instead of resorting to their trick. Remember, there is no such thing as free rent – there are only leases that may or may not work in your favor.