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Account for the Fee in Your Max Rent

August 7th, 2011 : The Naked Apartments Team

Are you only searching no-fee apartments in order to save money?

We’ll show you how to adjust your rent to account for a 15% broker’s fee. You’ll expand your apartment choices significantly, and spend the same as you would on a no-fee apartment.

Why are there so few no-fee apartments? Two reasons:

1) It’s not easy to bypass brokers because most landlords rely on them to find tenants.  They do this because the alternative is expensive. There’s a significant cost for landlords that rent out their apartments directly – staff salaries, advertising, office space, etc.

2) If you’re using a broker, no-fee apartments are only available in buildings where the landlord will pay the broker’s fee so you don’t have to.  And unfortunately, for a great apartment, a landlord doesn’t need to pay the fee for you.  He/she knows the apartment will rent out without the added incentive of no-fee.  (More on why this is the case in a previous blog post.)

So how do you search for with-fee apartments in order to expand your choices, but not spend a penny more than you would on a no-fee apartment?

Try searching for with-fee apartments, but lower your max rent to account for the fee spread over the length of your lease.  You may be thinking: “I don’t want a cheaper apartment!”  But while you definitely will have to sort through some apartments that don’t meet your standards, you’ll likely come across a few gems that you otherwise would never have seen by searching no-fee only.

Calculation for max rent with a broker's fee

Here’s how to do the math and  determine what your max rent would be with a 15% fee.  We’ll walk you through the steps:

  • Math for a 1 year lease

    • Assuming you’re only going to live in your place for one year, the magic number is 87%.
    • Multiply 87% by your max monthly rent (0.87 x rent) to determine what you can afford to pay per month with a 15% brokers fee.
    • For example, let’s say that you’ve decided the most you can pay is $2,000 per month for a no-fee apartment.
    • If you multiply $2,000 by 87%, you’ll get $1,740. That’s how much you can afford, with a 15% broker’s fee, to arrive at $2,000 per month.
      • Breaking down the math

        • One year’s rent: $1,740 x 12 months = $20,880
        • Broker’s fee: $20,880 x 15% = $3,132
        • Broker’s fee divided by 12 months: $3,132/12 = $261
        • Ta-da!: Your max rent of $1,740 + $261 = $2,000 (ok – $2,001 but it’s close enough!)
  • Math for a 2 year lease

    • Assuming you’re going to live in your place for two years, the magic number to do the math is 93%.
    • Multiply 93% by your Max Monthly Rent (0.93 x rent) to determine what you can afford to pay per month with a 15% brokers fee for the first year’s lease amount. (This assumes you negotiate to pay a 15% broker’s fee, on the first year’s lease, even if you sign a 2 year agreement with the landlord.)
    • For example, let’s say that you’ve decided the most you can pay is $2,000 per month for a no-fee apartment.
    • If you multiply $2,000 by 93%, you’ll get $1,860. That’s how much you can afford, with a 15% broker’s fee, to arrive at $2,000 per month.
      • Breaking down the math

        • One year’s rent: $1,860 x 12 months = $22,320
        • Broker’s fee: $22,320 x 15% = $3,348
        • Broker’s fee divided by 24 months: $3,348/24 = $140
        • Ta-da!: Your max rent of $1,860 + $140 = $2,000

So what’s the catch?  Cash! If you don’t have money saved up to pay the broker’s fee, well then this option isn’t for you.  But remember not to stretch your budget.  Here’s help to calculate how much rent you can afford.

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