I'm evaluating an apartment lease where the building is offering 2 months free on a 14 month lease. I'm 100% certain I'll move out when the lease expires (I literally just own a mattress, so moving cost is negligible).
My question is about the right mental model for budgeting this. Should I think about the cost as the base monthly rent, or should I amortize the total cost across all months (i.e., total rent paid ÷ total months)?
For example, if the gross rent is $3,000/mo on a 14-month lease with 2 months free, I'd actually pay $3,000 × 12 = $36,000 over 14 months, making the effective monthly cost ~$2,571.
My instinct says amortize, since I know I'm leaving and there's no renewal at the gross rent to "revert" to. The amortized rent is the real cost at the end of the lease. But on the other hand, the base rent is the actual amount leaving my account each month. And amortizing does seem like cope sometimes.
I do have the discipline to set aside the free month's rent in a separate account to split amongst the payments in the non-free months.
Is signing a lease because of "2 months free" a trap?
byu/megamemelord421 infinancialindependence
Posted by megamemelord421
7 Comments
I would just add 2x$3k to my efund or investments.
you should think about it as a discount spread across the full lease term of rent
How are they actually applying it? Upfront Credits: You pay $0 for the first month or two, then full rent for the remainder.
End-of-Lease Credits: You pay full rent initially, and the last one or two months are free.
Prorated/Spread Across Lease: The total value of the free rent is divided over the entire lease term. For example, on a 12-month lease with 2 months free, the total cost is divided by 12, resulting in a lower monthly rent payment for every month.
I feel like you’re overthinking it. As long as the rent isn’t higher than you’d pay elsewhere eating up the free 2 months, it’s a free 2 months. You’re going to need to live somewhere.
In your example if you found a rent cheaper than 2,571/m then you’d come out ahead, all else being equal. Does it increase other costs like transportation? Do you like this location/building? etc
Just read the contract carefully.
Holy overthinking
Are you sure you’re not putting too much mental effort into this? You’re leaving for sure in 14 months, so this portion of your budget is going to change in a year. However you account for it in this one off 14 month period doesn’t seem to have much bearing on anything.
Presumably you’re still going to optimize what you do with your remaining money, regardless of how you do document this on your budget spreadsheet.
This was confusing to read. Why do you only have a mattress? Do you wear clothes?
Ok to your question, the monthly average cost is 2,571. The free months are free.
Do as you wish with the cash on the free months – you don’t actually have to make a special account to save the money and then transfer it into another account? I wasn’t sure I understand that. But either way it’s average 2,571mo