As a landlord, managing rental properties comes with its challenges. One such challenge is the confusion that often comes with prorated rent.
Prorated rent is a portion of the monthly rent amount owed by a tenant who moves in or out of a rental unit mid-month. A prorated rent calculator can help landlords calculate the correct amount of prorated rent owed by a tenant.
This guide will help you understand what prorated rent is and how to calculate it. We will also discuss when to prorate rent, and other tips to keep in mind when prorating rent.
What Is Prorated Rent?
Prorated rent is a calculated amount that a tenant needs to pay when occupying a rental property only over a partial period and not a full month. It is often used when a tenant moves in after the start of the calendar month or out before the end of the month.
For example, if a tenant moves in on the 15th of the month, they will owe prorated rent for the remaining 15 days of the month. Prorated rent is calculated based on the daily rate of the monthly rent.
When to Prorate Rent
If a lease starts after the first day of the month or if a property is only occupied later in the month, then you would need to prorate the rental amount owed for the portion of the month the tenant is on the property.
Prorated rent is also commonly used when a lease is terminated before the end of the month if they are not in breach of contract. This can occur for a variety of reasons, such as the property being sold, a change in employment, a need for a larger or smaller living space, or a desire to relocate.
Two Formulas for Calculating Prorated Rent
Calculating prorated rent is relatively simple, but it does require some basic math.
To calculate prorated rent, you first need to determine the monthly rent amount and the total number of days in the month. Divide the monthly rent by the number of days in the month to get the daily rate. Then, multiply the daily rate by the number of days the tenant occupied the rental unit during that month.
The formula for calculating prorated rent is as follows:
Prorated rent = (Monthly rent / Total days in the month) x Number of days rented.
For example, if the monthly rent is $1,200 and there are 30 days in the month, the daily rent amount would be $40.
Next, you need to determine the number of days that the tenant will be renting the property. For example, if the tenant moves in on the 15th of the month and the rental period ends on the last day of the month, the number of days rented would be 16.
Using the formula above, you can calculate the prorated rent for those 16 days:
Prorated rent = ($1,200 / 30) x 16 = $640
So, the tenant would owe $640 in prorated rent for the partial rental period.
A more complex but more accurate prorated rent calculator works with the number of days in a year, especially useful if you are dealing with a year-long lease.
Prorated rent = ((Monthly rent x Months in a year) / Total days in a year) x Number of days rented.
Prorated rent = (($1,200 x 12)/ 365) x 16 = $631.23
Move-in Prorated Calculator
A move-in prorated calculator can help give tenants an accurate idea of how much prorated rent will be due if they move in mid-month. It is also a valuable tool for landlords, simplifying the rent calculation process.
Using a move-in prorated calculator can save time and prevent errors in prorated rent calculations. It can also help landlords and tenants avoid disputes over how much prorated rent is owed.
All you need to do is enter the monthly rent amount, the move-in date, and the end date of the rental period, and the calculator will determine the number of days rented and calculate the prorated rent owed.
It's important to note that move-in prorated rent is typically due at the time of move-in, in addition to the first month's rent and any security deposit. As a landlord you need to make sure you communicate the prorated rent amount and due date to the tenant before move-in to avoid any confusion or delays in payment.
Move-out Prorated Calculator
A move-out prorated calculator works similarly to the move-in calculator, but instead of calculating the prorated rent owed at the beginning of a rental period, it calculates the prorated rent owed at the end of a rental period. This is useful for tenants who are moving out of a rental property before the end of the rental period.
To use a move-out prorated calculator, you will need to enter the monthly rent amount, the move-out date, and the end date of the rental period. The calculator will then determine the number of days rented and calculate the prorated rent owed.
Tips to Keep in Mind When Prorating Rent
When prorating rent, there are a few things to keep in mind that could affect the prorated amount calculated:
- Are there 30 or 31 days in the prorated month?
- If you are prorating for the month of February, is it 28 or 29 days (a leap year)?
- What day of the month do you bill the tenant?
- What is the official start and end date of the lease?
Some additional tips include:
- Putting your prorating policy in writing in any lease agreement.
- Prorated rent only in situations where a suitable tenant was found after the start of the month, or when the lease terminates for reasons out of the tenant’s control such as you the property being sold.
- If your tenant signs a lease but only moves in later, the full-term rent needs to be paid.
- If a lease runs to the end of the month but your tenant opts to move out earlier, the full month’s rent still needs to be paid.
Why You Should Include Prorated Rent in the Lease Agreement
Including a prorated rent clause in the lease agreement can help landlords avoid confusion with tenants. It clarifies how prorated rent will be calculated and when it will be required. It can also prevent disputes over the amount of prorated rent owed by the tenant.
When Can Renters Ask for Prorated Rent?
Renters can ask for prorated rent when they move into a rental property in the middle of a rental period or when they move out before the end of a rental period. In some cases, you may also prorate rent if a tenant decides to renew their lease for a shorter period.
If you are wondering whether prorated rent is worth it, consider this: with an easy-to-follow formula or a prorated rent calculator, prorating is easy. When you are clear about your prorated rent policy and how it is calculated, you build trust and a good relationship with your tenants. You also avoid disputes down the line.
For more advice and great landlord insurance, contact Steadily on (888) 966-1611 or you can get a free quote online.