Maximizing Savings: A Guide to Self-Prorating Apartment Specials
By Torey Davis
Self-prorating an apartment special is the process of calculating the total value of your special, deducting it from the total dollar amount of your whole lease, and calculating the new “net effective” rate over your lease term. Setting the “net effective” amount aside and drawing out of it each month to reduce your overall monthly payment to the “net effective” rate.
Still kinda cloudy? Read on!
While finding an apartment can be super exciting, it involves ALL the math – especially when you come across up-front specials like “one month free” or “6 weeks free.” These promotions can significantly lower your overall rental costs, but understanding how to self-prorate them can be the key to maximizing your savings. In this blog, we’ll explore what self-prorating means, why it matters, and how you can take advantage of these specials to get the most out of your lease for the lowest monthly cost!
Self-prorating is a method that allows you to distribute the value of a rent concession, such as a month or weeks of free rent, evenly across the entire lease term. Typically, property managers advertise these specials based on a standard 12-month lease. However, if you’re considering a lease with a different term, self-prorating helps you adjust the promotion to accurately reflect your rental period.
Evaluate the Lowest Cost Lease Term: Self-prorating enables you to adapt the promotion to various lease lengths, be it a 12-month, 18-month, or any other term. This flexibility allows you to compare different leasing options more accurately. For instance, some properties might be $10 cheaper on the base rent for a 12 month lease compared to a 15 month lease, but if the 15 month lease gets a month free and the 12 month lease doesn’t, which is the better deal?
Accurate Budgeting: By self-prorating, you gain a clearer understanding of your monthly expenses throughout the lease term. This helps in budgeting and prevents any surprises when it comes to your monthly rent payments.
Transparent Comparison: When considering different apartments with varying lease terms and specials, self-prorating allows you to compare them more objectively. It ensures you’re evaluating the true cost of each option, making it easier to choose the best value for your needs.
How to Self-Prorate an Apartment Special:
Step 1: Determine the Total Value of the Special: Begin by calculating the total value of the special. For example, if the promotion is “one month free” on a $1,200 per month apartment, the total value of your “one month free” special is $1,200. That’s the money you want to stash away in savings or another easily accessible account during your completely free month.
Step 2: Identify Your Lease Term: Decide on the length of your lease term. Let’s say you’re considering a 15-month lease.
Step 3: Divide the Total Special Value by the Lease Term: Divide the total special value by the number of months in your lease term. In our example, $1,200 / 15 months = $80 per month.
Step 4: Subtract the Monthly Discount from Rent: Deduct the calculated monthly discount from the advertised monthly rent. In our case, if the original rent is $1,200, subtract $80 to get your adjusted monthly payment: $1,200 – $80 = $1,120 net effective. You’ll take this $80 a month from the savings in step 1 to reduce your out of pocket cost to $1,120 per month!!
This is a lot – What if I don’t want to self-prorate??
Even if you don’t self pro-rate, the same total money will come out of your pocket over the lifetime of your initial lease term – so in total, there is no cost difference.
In conclusion, self-prorating apartment specials empowers you, the renter, to make informed decisions that align with your personalized needs! By understanding the process and following these steps, you can confidently compare apartments, evaluate the true value of promotions, and ultimately secure a rental that maximizes your savings over the lease term. Looking to move to the DFW area and need help with apartment hunting? Let us help you!