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NER Across Different Lease Terms

Compare Net Effective Rent for 6-month, 12-month, 18-month, and 24-month lease terms with the same concession. See which lease term maximizes revenue and minimizes concession impact.

Lease Assumptions

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Same concession applied across all lease terms

NER by Lease Term

Enter monthly rent and concession to compare NER across lease terms

How NER Is Calculated Across Lease Terms

NER = (Monthly Rent x Term - Concession) / Term

Concession Dilution

The same concession has a larger impact on shorter leases. One month free on a 6-month lease reduces NER by 16.7%, but only 8.3% on a 12-month lease and 4.2% on a 24-month lease. This is why longer lease terms typically generate higher effective rent.

Annual Effective Rent

NER multiplied by 12 gives you the annualized effective rent — the actual revenue the unit generates per year after concessions. This is the metric that matters for NOI calculations and property valuation.

Why Lease Term Analysis Matters

Revenue Optimization

Longer lease terms dilute concessions and stabilize revenue. Knowing the NER difference helps you set term-based pricing strategies.

Turnover Cost Avoidance

Shorter leases mean more frequent turnovers. Factor in $1,500-3,000+ in turn costs per unit and 2-4 weeks vacancy when comparing shorter vs. longer terms.

Lease Expiration Staggering

Varying lease terms prevents clustering of expirations. A portfolio with well-staggered expirations reduces the risk of mass vacancy during soft market periods.

Optimize NER across every unit in your portfolio.

BubbleGum BI calculates NER for every lease in your portfolio — by unit, building, and market. Cai identifies which concession strategies maximize revenue and flags underperforming lease terms automatically.

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Frequently Asked Questions

What is Net Effective Rent (NER)?
Net Effective Rent is the actual monthly rent a tenant pays after concessions are amortized over the lease term. If asking rent is $1,800/month on a 12-month lease with 1 month free, the NER is ($1,800 x 12 - $1,800) / 12 = $1,650/month. NER reflects true revenue per unit more accurately than face rent.
Why does lease term length matter for NER?
The same concession has a smaller per-month impact on longer leases. One month free reduces NER by 16.7% on a 6-month lease but only 4.2% on a 24-month lease. Longer terms effectively dilute the concession, resulting in higher NER and more predictable annual revenue.
Should I offer larger concessions for longer lease terms?
It depends on your vacancy and turnover costs. A slightly larger concession for a 24-month lease may be worth it because you avoid a turnover ($2,000-3,000) and vacancy loss. Run the NER comparison with different concession levels for each term to find the optimal combination.
How do short-term leases affect NOI?
Short-term leases increase turnover frequency, which means more vacancy days, more turn costs, and more leasing expenses. Even if the asking rent is higher for a 6-month lease, the total cost of turnover can reduce effective annual income below what a 12- or 24-month lease would generate.
How does BubbleGum BI track NER across a portfolio?
BubbleGum BI automatically calculates NER for every active lease using concession and term data from your property management system. Cai provides portfolio-wide NER analysis, identifies which properties have the highest concession exposure, and recommends lease term strategies to optimize revenue.