If you’re a landlord, you know that prorated rent can be a huge help to your tenants. By calculating the rent for a new tenant based on the number of days they will be occupying the property, you can make the move-in process easier for them.
Most landlords have had to prorate at least once or twice for a tenant, and there can be numerous reasons for doing so.
The most common reason that landlords have to deal with prorated rent is, when tenants move in or out mid-month and tenants only want to pay for the number of days they are actually occupying the property.
Prorating the rent can be a great way to help your tenant however, it isn’t always ideal for landlords. It requires more work, especially when managing multiple rental properties, and this can become a challenging task. With that said, many benefits make this strategy worth considering for landlords like yourself!
What is Prorated Rent?
Prorated rent is rent that is charged on a per-day basis rather than monthly. It’s usually used when a tenant moves in or out of a property during the month.
For example, if a tenant moves in on the 15th of the month, they would only be charged for the remaining days of that month. The same calculation applies if a tenant moves out on the 20th of the month, they will only have to pay for the first 20 days of rent.
How To Calculate Prorated Rent?
There are several different methods that can be used. It’s a choice that must be made depending upon the situation and preferences of the landlord or property owner.
One method is using the calendar month in which the daily rate varies from month to month but remains consistent over a year. In other words, landlords calculate the prorated rate based on the number of days in the actual month in question.
Another option is to calculate rent based on the average number of days per month, which is 30.42. Whichever option you choose, it’s important to be aware of all the different factors that go into prorating rent so that you can make the best decision for your tenant and property.
Let’s look at both formulas using an example:
Monthly Rent: $1400.00
Move-out Date: 20th of March
So basically the tenant will only pay 20 days out of the 31 days for the month of March.
(Total monthly rent / Numbers of Days in the month) x Number of Days To Pay Rent
(1400 / 31 [days in March]) / 20 [days in property] = 45.16 x 20 = 903.22
(Total monthly rent / 30.42) x Numbers of Days To Pay Rent
1400 / 30.42) x 20 = 46.02 x 20 = 920
Whether you choose the first or second option to calculate prorated rent, you should always include it in the lease agreement to avoid any confusion with tenants.
Should Landlords Prorate Rent?
According to the law, landlords are not required to provide pro-rated rent costs.
What are the benefits of prorating rent?
However, some landlords may not always be in a position to prorate the rent.
Ultimately, the decision of whether or not to prorate rent is a personal one for every landlord and depends on the specific circumstances involved.
Do you prorate rent? If so, how does it work for you? What are the benefits of the prorated rent for landlords and tenants alike? Let us know in the comments below. We love to hear from our readers!
Blackstone Group Leasing & Management is a property management company located in Rhode Island. If you are interested to learn more about our services, feel free to contact us.