Sometimes, tenants move in or move out mid-way through the month, and they’ll ask their landlord for prorated rent.
Prorated rent is the amount of money a landlord charges a tenant when they occupy a unit for part of the month.
In such cases, it’s not fair to charge them an entire month’s rent. But, how much do you charge? There are two popular methods of calculating prorated rent and both are quite simple. Here they are:
1. Prorate by the number of days in the month
This is the most popular method to prorate rent, and it’s easy to calculate.
Divide the monthly rent by the number of days in the month. Then take that number and multiply it by the number of days that your tenant is paying for. That number is how much you charge.
As an example, assume that your tenant is moving in on July 17, and the monthly rent is $1,500. The equation would be as such:
( $1,500 / 31 ) * 15 = $725.80
There are a couple benefits to prorating rent using this method. One, this accurately prorates the rent in any month regardless of whether the month has 30 days or 31 days in it. Two, this method is easy to for landlords and tenants alike to understand.
2. Prorate according to the number of days in the year
If you have a year-long lease with your tenant, this is technically the most accurate method of prorating rent, since it tells how much the tenant pays in rent per day.
Multiply the monthly rent by 12 (the number of months in the year). Take that number and divide by 365 (the number of the year). This gives you how much rent your tenant pays each day. Then take that number and multiply it by the number of days your tenant will pay. The result is how much you charge.
Using a move-in date of July 17, and a monthly rent of $1,500, the equation would be:
( ( $1,500 * 12 ) / 365 ) * 15 = $739.73
If the current month has 31 days, a yearly prorated calculation will return a higher yield than a monthly calculation. However, if the current month has 30 days or less, the monthly calculation will be slightly higher. If a tenant wants to have their rent prorated during a month that has 30 days, they may argue that this calculation unfairly charges them a few extra dollars, so be prepared to explain your rationale (or, use the alternative method described above).
If you use Cozy to collect rent online for free, you can choose to collect a prorated amount for the first month.