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How Do You Calculate Prorated Rent?

How Do You Calculate Prorated Rent?

When a tenant pays a 'prorated rent,' it means that they're only paying a portion of the regular rent. There are many scenarios where charging your rent this way can make things fair for your tenant. Therefore, it's a good idea for all real estate investors to learn how to calculate this type of rent. 

Read on to learn more about prorated rent and how to calculate it. 

When Should Real Estate Investors Charge Prorated Rent? 

There's a problem that can often confuse new real estate investors at the beginning of a rental leasing period. After they've performed property maintenance, put up their "for rent by owner" sign, gone through tenant screenings, and signed the lease contract, a tenant may not move in on the first of the month. He or she will likely instead move in on a date partway through the month. 

This can also happen when a tenant wants to move out of your investment property. He or she may then request that you don't charge them for the whole month. After all, he or she didn't live in your building for the whole month. 

You can fulfill this request by calculating and charging him or her a prorated rent. 

How to Calculate Prorated Rent by the Days in a Month

If you're charging rent by the month, it's best to use this method. 

The first step is to determine and write down your usual monthly charge. Make sure that you confirm it's accurate by looking at past checks from the client. Then, take that rate and divide it by the number of days in the month with partial occupancy. 

For example, if your tenant moved out halfway through September, you'd divide the rent charge by 30. If he or she moved out in July, you'd divide it by 31. 

Once you've done this calculation, you'll have the daily rent that you'd normally charge this tenant every day of that month. You can then multiply this number by the exact amount of days that the tenant will stay in your building during that month. You should then have the amount that you should charge him or her. 

An Example Situation of Prorated Rent 

Imagine that your tenant wants to move out on April 17th. You usually charge him or her $1200 in rent. So you first take $1200 and divide it by 30. 

You should determine that your tenant should pay $40 a day in April. Multiply this by 17, and you'll get $680. That's how much you should charge your tenant for the partial month. 

Let Us Be Your Salt Lake City Property Managers 

As you can see, the prorated rent calculation is rather easy. You should be able to memorize it quickly and pull it up whenever it's necessary. This way, you'll save yourself a lot of the headaches that can come from partial monthly occupation. 

Also, if you need more help with property management, consider our services. We assist real estate investors with setting fair rents, screening tenants, marketing their properties, and much more. Contact us now for a free property consultation.