Specials, Concessions, Self-Prorating: What does that even mean?

We pride ourselves on being able to find our clients the best apartment deals in their cities. The main way we do this is by finding or negotiating the best specials and concessions around. Specials and concessions are great because they level the playing field when it comes to what is classified as “affordable” for our clients; better said — it gives you more options to tour and choose from!

The essence of specials is straightforward—they help renters save money. But once you open up the conversation about types of specials, their application, and how they impact how apartments approve you as a tenant, it becomes a bit of a Pandora’s box. As your resident apartment experts, we’re here to simplify it as best as we can.

Don’t feel like reading? Stop here and watch the video explanation!👇 

Understanding specials and concessions

A special is an incentive properties offer interested renters to compel them to sign a lease. These can be rent-related specials like “X weeks free” to “X months free” to “first month free” to “$XXX off”; or fee-related specials like “free parking for X months,” “waived app/admin fees” and so on, and so forth. Fee-related specials are pretty cut-and-dry, so we’re going to spend this blog diving into the different definitions and applications of rent-related specials. 

How are specials given to the renter?

Properties will typically apply specials in one of two ways – completely up-front, or as a credit to the renter account.

An upfront special is the most simple and direct application of a special, where it is applied directly at the beginning of your lease. In this scenerio, you’d pay nothing for your first month, keeping $1500 to yourself on month one. Then, your 2-12 months’ payments would be the market rate of $1,500 each month. You can self-prorate with upfront specials, but it’s a little more complicated (more on this shortly!).

An applied credit means the property has placed the dollar value equivalent of your special (1 month free = $1,500) in your online rental portal. Every month, you’ll see your market rent due, but you’ll have the option to pay using your bank account and/or that credit. Think of the credit like a gift card—you could use it all at once, or you could savor it over time.

Applied credits are given in two ways—either all at once, or parsed out. You may get 1/2 of that month free in your renter portal on the first month, and the other 1/2 on month 3, 4, 5, 6… it’s completely up to the property when they want to give it to you, and that timeline may impact your ability to self-prorate that credit.

You keep saying “self-prorate”? What’s that?

Back to the gift card analogy—think of self-prorating as the option where you use a little bit of the gift card on something small each time you go to Target instead of spending it on one big-ticket item. Translated into rental terms; self-prorating is breaking down the dollar value of your special into small even portions, and using a portion each month to bring your rent down.

You know what the market rent is, but now we’re going to bring in the term effective rent. Effective rent is the lowered monthly amount you pay after that small portion of the special is applied to your market rent. To clarify, let’s do the math together.

1) Take the market rent and divide it by the number of months in your lease term:

$1,500 / 12 months = $125 

2) Your result of $125 is a small chunk of cash you can then subtract from your market rent, yielding your effective rent:

$1500 market – $125 = $1375 effective

PRO TIP: Not a math person? Neither are we. Use this calculator to do the math for you!

So, if you had a credit in your account, you’d pay $125 of your monthly rent using the credit, and $1375 of it through your bank account. $1500 is being paid each month, but only $1375 of it is your money.

But what if the special was given up-front and you paid $0 month one, but have to pay $1500 each consecutive month? Have no fear! Self-proration is possible, but you have to hold yourself accountable to portioning it out. Reframe “I paid $0 month one” to “I saved $1500 month one”. Commit to keeping $1500 in a savings account, and after you pay $1500 in rent from your checking account, pay yourself back $125 each month.

Funky situations

What if my special is given in weeks free instead of months free? 

1) First, multiply the market rent by the number of months in the lease term.

$1,500/month x 12-month lease= $18,000 total

2) Then, divide that number by the number of weeks in the lease term.

$18,000/ 52 weeks (in 12 months)= $346.15.

3) Now, multiply that by the number of weeks that apply to the special.

$346.15x 6 (weeks free)= $2077 total savings throughout your 12-month lease

*If it were a 10-month lease, you’d divide by 40 weeks; a 15-month lease, you’d divide by 60 weeks, and so on to get your total savings.

4) Then, to see your effective rent each month after the special, you’ll divide the last number by the number of months in the lease and subtract that from the market rate.

$2077/ 12-month lease= $173.08

$1,500 market rate – $173.08= $1327 effective monthly rent!

What if my special is applied at two separate times?

Scenario 1: Keep our hypothetical lease and special the same, but pretend that instead of all of it being given on your first month, 1/2 a month free is given on the first month ($750 equivalent), and the other half is given on the sixth month. In this case, there’s no change in how you self-prorate. You’ll still subtract $125 from your market rent each month, but after month 5, you’ll have spent the first half of your savings. Month 6, the property will re-up your special, and you’ll proceed with prorating for the rest of your lease.

Scenario 2: Now pretend that 1/2 a month free is given on the second month, and the other half is given on the eighth month. This is the ONLY scenario in which proportional self-proration is not possible. You have to pay $1500 your first month, because there’s no savings or credit to pull from yet. You’ll run out of savings to pull from after month 6, and on month 7, you’ll have to pay $1500. You may be able to apply your credit in chunks of varying value over your lease term, but it won’t be in a simple, proportional way. Math will be more complicated, and many prefer to skip the calculations and just use each batch of savings at one time (*insert “ain’t nobody got time for that” meme here*).

An important note about specials & income qualifications:

Now that we’ve covered the types of specials/concessions that are out there, how to calculate anticipated savings from them and what market/effective rents are, let’s touch on the application process for a moment. While it’s exciting to note effective rent after a special has been applied, it’s important to also note the market rate, as well. The reason being that properties will either qualify you (approve you) for that apartment based on the market rate or on the effective rent once you apply.

Typically, properties qualify (approve) applicants based on market rates, and remember, the general rule of thumb to get approved for an apartment is to show financial documents proving pre-tax income of 2-3x the rent. In our scenario, you’d have to make 2-3x the market rent of $1500 (so $3,000-$4,500/mo), NOT 2-3x the effective rent of $1375.

The area in which we see renters get caught up on this the most is when properties with higher market rates offer a multi-month special. While getting 2-plus months free can bring effective pricing down to a very alluring monthly rate, the approval could still be based on proving finances equating to 3x the monthly market rate. So, whether you’re working with an apartment locator or not, this is valuable information for any apartment renter to know!

Who knew saving money could require so much work, right?! At the end of the day, rent is most people’s biggest monthly expense, so every bit of savings is definitely worth it! Hopefully, this blog brought clarity around specials, concessions, and what it means when you have to self-prorate!

If you’re over finding and calculating apartment specials, let us know – You’ll end up gaining hours and hours back to your life (which is a “saver” all in itself)!