How to Prorate Rent


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Sometimes, being a landlord means ensuring that your tenant is happy and treated fairly in every scenario. When you have a renter who does not move in until halfway through the month, you may have to learn how to prorate rent to make sure they’re not overpaying for the half month they are not occupying your unit.

But what exactly is prorated rent? When your tenant wishes to move in after the usual rent payment date, you need to take off some of the rent payment amount and prorate the rentto ensure they only pay for the time they use the property. The word “prorate” arose from the Latin term “pro rata”, which refers to reducing something based on proportion and usage. In a real estate example, if your tenant Larry moves in 15 days after the start of the month, the landlord would probably only charge him half their usual rental payment. That reduced payment is the prorated rental amount.

Prorating rent for your tenants is to make sure you’re being fair. This benefits both you and your renters- no one is paying for any more or less than what they’re using. Although landlords are not required to prorate rent by law, when your tenants request a lowered amount to accommodate their move-in date, be open to hearing them out. Below we will outline the different methods of performing the prorate rent calculation to make this process as easy as possible.

Calculating Prorated Rent by Month

The first method for calculating prorated rent is by the days in the month. The best equation to use for this method is:

The rental amount divided by the number of days in the month multiplied by the number of days the tenant occupies the property.

Your first step is to divide the monthly rent amount by the number of days in the month (monthly rent amount / days in the month) to find the daily rent amount. Next, find the prorated rent amount by multiplying the daily rent amount by the total days of occupancy (daily rent amount * days of occupancy).

Calculating Prorated Rent by Days in the Year

The second, and more accurate, method of calculating prorated rent is by days in the year. This equation is as follows:

Monthly rent amount multiplied by 12 (months in a year) divided by 365 (days in a year) = daily rent amount

Next, calculate the cost for the days the tenant will occupy the unit by following this equation:

Daily rent amount multiplied by the number of days the tenant occupies the property that month.

Step one is to find the daily rent amount by calculating the monthly rent amount * months in a year / days in a year.

Step two is to find the prorated rent amount by calculating the daily rent amount * days of occupancy.

When calculating prorated rent by days in the year, make sure you keep a few things in mind.

Leap years are 366 days and will throw off your final number. Although it will not impact your number by an extreme amount, you should always aim to be as accurate as possible when conducting these calculations.

Also, try not to round any answers until the very end of your calculation. We recommend using four decimal places to ensure the utmost accuracy for your final prorated rent amount.

Examples

To double-check for understanding, let’s practice prorate rent calculation using an example.

Calculating Prorated Rent by Month

Let’s say Larry is requesting prorated rent. Here are his move-in details:

Move-in Day: March 19th

Days in March: 31

Days of Occupancy: 12

Full Monthly Rent: $500

To calculate Larry’s prorated rent for the first month, we will go step by step.

Step 1: Find the daily rent amount (Monthly rent amount / Days in the Month)

  • $500 / 31 = $16.1290

Step 2: Find the prorated rent amount (Daily Rent Amount * Days of Occupancy)

  • $16.1290 * 12 = $193.548

Rounded, Larry’s prorated rent amount is $193.55.

Calculating Prorated Rent by Days in the Year

We will use the same information based on Larry’s example above:

Move-in Day: March 19th

Days in March: 31

Days of Occupancy: 12

Full Monthly Rent: $500

Again, let’s go step by step.

Step 1: Find the daily rent amount (Monthly Rent Amount * Months in a Year) / Days in a Year

  • ($600 * 12) / 365 = $19.7260

Step 2: Find the prorated rent amount (Daily Rent Amount * Days of Occupancy)

  • $19.7260 * 12 = $236.712

Rounded, Larry’s prorated rent amount is $236.71.

Final Thoughts

Calculating prorated rent by number of days in the year is the most accurate method. However, if you find calculating by month easier, feel free to go that route.

Make sure you communicate the correct move-in and move-out dates with your tenant to avoid any confusion or miscommunications about payment. Also, consider using property management software like Innago for rent collection, so you can make sure non-recurring payments like prorated rent or late fees are easily enforced without much direct action from you.

To increase fairness for both you and your tenants, come up with a proration policy and stick to it. Both parties will be happiest with an arrangement that’s well-explained and thorough.


Ali Hyder

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