Most landlords collect rent on the same day each month for the sake of efficiency and predictability. But if a tenant can move in sooner than expected, why lose money by keeping the property vacant till the original start date? Or if a renter must stay in his unit slightly beyond his lease’s end date, is it fair to charge another full month’s rent? Under these circumstances, prorated rent may be in both your and your tenant’s best interests.
Prorated rent calculates the tenant’s partial monthly payment based on the percentage of the month they occupied the property. While state and local laws don’t usually require it, prorating rent has advantages. For example, it allows tenants more flexible moving dates while keeping the landlord’s income consistent.
Calculating Prorated Rent
To calculate prorated rent, find the daily rent amount for the unit. There are several methods of deriving this daily rate:
1) Divide monthly rent by the number of days in that month. This approach is simple to calculate and straightforward to explain to tenants.
2) Divide monthly rent by a “banker’s month”: 30 days. Using a banker’s month instead of a calendar month makes averages more consistent.
3) Multiply monthly rent by 12 and divide by 365. This calculation involves an extra step, but it gives the most exact daily rent result. Remember to divide by 366 during a Leap Year!
Once you’ve determined the daily rent, multiply that figure by the number of days the tenant will occupy the unit in the prorated month. For example, let’s say your tenant’s lease will start on March 22nd for a unit with a monthly rent of $1,000.
Method 1: $1,000 monthly rent / 31 days in March = $32.26 daily rent x 10 days occupancy = $322.60 in prorated rent
Method 2: $1,000 monthly rent / 30 days in banker’s month = $33.33 daily rent x 10 days occupancy = $333.30 in prorated rent
Method 3: $1,000 monthly rent x 12 months = $12,000 yearly rent / 365 days in year = $32.88 daily rent x 10 days occupancy = $328.80 in prorated rent
For your convenience, various proration calculators are available online. Whatever method you choose, be consistent; and put your policy in writing to avoid surprises and conflict. Prorating creates a reasonable compromise between landlords and tenants by demonstrating fairness and respect.
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Rentals America provides full-service property management for residential rental properties. Our team is wholly dedicated to property management, and we’re here to help landlords navigate the rental market.
