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How Do You Calculate Prorated Rent?

How Do You Calculate Prorated Rent?

It's often inconvenient for landlords when a tenant wants to move in on any day other than the first of the month. Yet, there are times when it's a good idea to allow them early occupation.

Property managers recommend accepting tenants whenever tenants are ready to occupy your unit. It's better to do a few simple calculations than to miss out on rental income for your investment property.

Read on to discover why you might charge prorated rent and how to do the sums.

Reasons to Charge Prorated Rent

Lately, every day counts for residential landlords as vacancy rates continue to rise nationally. So, if you own a single rental unit, there's no reason why you can't allow a tenant to pay their rent every month on the same date they moved in.

For those who own multiple units, it can get challenging to administer different dates for monthly rent collections. In these cases, it's worth doing a few quick rental calculations to adjust the first month's rent accordingly and continue collecting rent on the first of the month after that.

In both cases, tenants would pay the usual security deposit.

Other times, you might agree to charge prorated rent if a tenant moves out a few days before their lease expires or if they need to stay for a few days beyond the lease term's end.

Ways to Calculate Prorated Rent

Calculating prorated rent is easy and worth it if it means signing up a new tenant faster. The process involves computing the value of each day in your rental unit and charging the tenant accordingly.

The terms of your lease agreement influence how you should determine the amount due.

Calculating Prorated Rent for Shorter Leases

This is the quickest and easiest prorated rent calculation. Simply add the number of days in each month of the lease and divide this by the number of months to get an average.

Then, divide the monthly rent amount by this number to get a daily rate. The tenant should pay this amount multiplied by the number of days left until the first of the month.

Calculating Prorated Rent for an Annual Lease

Another simple calculation. Calculating a daily rate for a year-to-year lease involves multiplying the monthly rent by 12 and dividing it by 365, or 366 in a leap year.

When you've found the daily rent, multiply this by the number of days the tenant will occupy the unit before the month ends.

You aren't legally obliged to accommodate tenants who move out before their lease expires, but you might do it as an act of good faith if they've been a good tenant.

In this case, you would use the formula for an annual lease.

Property Managers Make Everything Easier

If you're uncertain about when and how to calculate prorated rent, leave the math to the experts. Our team of property managers at Bahia Property Management is well-versed in everything it takes to maximize your Orlando properties.

Our comprehensive range of services includes accounting and pricing techniques to ensure your success as a landlord. Let us manage the finer details while you reap the benefits of owning an investment property.