Glossary term
Effective Rent
Effective rent is the average rent a resident actually pays over the lease after free rent and other concessions are spread across the term.
Asking rent is the number on the listing. Effective rent is what the lease really brings in once discounts are counted. If the asking rent is $1,500 a month on a 12-month lease with one month free, the effective rent is $1,375 a month ($18,000 minus $1,500, divided by 12 is $1,375).
Effective rent gives a fairer view of the market. A community with high asking rents and heavy concessions may earn less than one with lower asking rents and no concessions.
When you compare properties or study rent growth, check whether the figure is asking or effective. Mixing them leads to wrong conclusions.
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