So, you just found a new tenant who is interested in renting from you but they are going to be moving in at the middle of the month and you will need to charge them prorated rent. How do you charge it?
In this article we will break down prorated rent and provide you with two different strategies for calculating it.
There are two common ways to calculate prorated rent: Charge for the number of days the tenant spends on the property based on the monthly rate or the yearly rate. You can do the math easily on your own, or use an online prorated rent calculator.
Monthly Rate
This is a two step process:
- Figure out how much daily rent would cost based on dividing the monthly rate by days in the month.
- Multiply the cost of daily rent by days the tenant will spend in the unit for the month.
Here’s an example where a tenant spends 15 days of July in a unit that costs $950/month.
- $950 / 31 = $30.65
- $30.65 x 15 = $459.75
Yearly Rate
If your tenant is signing a year-long lease or longer, this is a preferred way to calculate prorated rent. This is a three step process:
- Figure out how much rent costs for the entire year by multiplying the number of months by the cost of rent.
- Determine daily rent by dividing the yearly cost by days in the year.
- Multiply the cost of daily rent by days the tenant will spend in the unit for the month.
Here’s the same example as above, but calculated for the yearly rate:
- $950 x 12 = $11,140
- $11,140 / 365 = $31.23
- $31.23 x 15 = $468.45
As a note, this extra step adds a layer of complexity that can confuse the tenant, but provides the most accurate amount for year-long leases. Either way you calculate it, make sure to be clear and transparent with your tenant to build that relationship of trust.
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