What Is Prorated Rent & How Do You Calculate It? (2024)
Go Back To Previous PageWhen signing a lease, most agreements start on the first of the month for accounting purposes. However, there are situations where you may need to move into an apartment on a different date. In such cases, you will pay a prorated rent for the days you occupy the unit outside the regular monthly term. Let’s look at what prorated rent means and how it works.
Pro-rating rent when a tenant moves in helps landlords earn more money. It also maintains high occupancy levels and boosts total revenue. There are four methods for pro-rating rent, each yielding different results depending on the month in which the tenant moves in.
By selecting the most suitable method for pro-rating rent based on the number of days in the month, landlords can increase the amount of pro-rated rent collected from a tenant.
Reasons to Use It
Prorating rent offers several advantages, with the main benefit being an increase in your rental income.
Here is a simplified version of the text:
“Think about this example: A person moves out of an apartment on the 1st. You then spend a week getting the unit ready for new tenants by the 7th.”
If you find someone willing to move in on the 7th or 8th, you can charge them a portion of the month’s rent for that time.
If you choose to wait until the 1st of next month to rent it out, you will lose rental income. This loss will be for the time between the 7th and the 1st.
Prorating rent helps reduce vacancy rates and enhances your cash flow from rental income. Offering prorated rent is one effective strategy to boost your earnings; however, finding great tenants is also crucial.
What Does Prorated Rent Mean?
This term refers to a portion of the full monthly rent based on the number of days a tenant occupies a rental property. It is due when a tenant occupies a residence for a partial term, such as a few days or a week.
You usually pay prorated rent when you stay in an apartment for a few extra days. This is in addition to your regular monthly lease. This usually happens at the beginning or end of a lease
when a tenant may need to move in or out a few days before or after the first of the month.
For example, if you move into a new apartment on the 20th, you must pay for the days you stay before the first month of your lease starts. If your lease ends on the 30th or 31st, you will be required to pay prorated rent. This applies if you cannot move out until later, like on the 5th of the month.
You would pay for the additional five days you plan to occupy the unit outside the monthly leasing period. In this situation, paying prorated rent means paying for the extra days you spend living in the apartment.
When Do You Pay Prorated Rent
When you move into an apartment for less than a month, you’ll pay a prorated rent amount. This means you’ll only pay for the days you use the apartment, rather than paying for the entire month.
Tenants often pay prorated rent at the start or end of a lease. This helps adjust the rent based on when they move in or out. Landlords typically prefer to start leases on the 1st of the month. If tenants want to move in early, they must pay for the extra days they’ll occupy the apartment.
The same applies to tenants who must move out a few days after their lease ends.
How To Calculate Prorated Rent payments?
There are two different ways to calculate: monthly and yearly. The monthly method is easier and faster, but the annual process is more accurate.
1. By Number of Days in a Month
To calculate prorated rent every month, you can follow these steps:
1. Divide the total rent by the total number of days in the month. This will give you the daily rate.
2. Multiply the daily rate by the days you’ll occupy the unit.
For example, if the rent is $1,500 and you move in on April 15:
1. Calculate the daily rate by dividing $1,500 by 30 or 31 days. $1500 / 30 = $50
2. Multiply the daily rate ($50) by the number of extra days you’ll occupy the unit (15). $50 x 15 = $750
In this example, you would owe $750 because you occupy the unit for half the month.
2. By Number of Days in a Year
As the number of days in a month varies, the daily rent rate will also vary. Some landlords may opt to calculate the prorated rent on an annual basis. To do this, you would first find the yearly rent by multiplying your monthly rent by 12.
Then, divide the annual rent by 366 days to get the daily rate based on a yearly schedule. Finally, multiply this daily rate by the days you plan to occupy the unit.
For example, if your monthly rent is $1,500:
$1,500 x 12 = $18,000 (annual rent)
$18,000 / 365 = $49.32 (daily rent)
$49.32 x 15 = $739.80 (15 days)
As you can see, the difference between calculating prorated rent monthly and yearly is only about $10. However, calculating prorated rent yearly provides a more accurate estimate because the number of days in a year does not fluctuate (except in leap years).
Example
Here’s an example of how prorated rent works. Let’s say a tenant rents an apartment for $3,000 a month. Their lease ends on May 31, but they must stay until June 10. The landlord will charge them $1,000 prorated rent between June 1 and June 10.
To calculate the prorated rent, first determine the daily rental rate and then multiply it by the number of days.
Tips To Keep In Mind When Prorating Rent
This approach can be a helpful way to negotiate an early move-in date. However, there are a few essential things to keep in mind:
Prorated rent usually applies to the rent paid before your official lease term begins. If you move in after the 1st of the month, you are still responsible for paying the entire month’s rent unless you and the landlord agree to start the term on the 1st of the following month.
Ensure the landlord clearly outlines all the rent you owe in the lease, including any prorated rent.
If you need to extend your lease beyond the original term but don’t want to renew for an entire year, you can request a month-to-month lease from the landlord. Even if you pay for the additional days you occupy the unit, a lease is still a good idea to avoid potential problems.
Bottom Line
Adjusting the rent if you move into an apartment a few days early or stay late is essential. Paying prorated rent means you only pay for the days you live in the apartment, ensuring everyone gets a fair deal. Without prorating rent, you’d have to pay for the entire month, including days you aren’t using the property, which would be a waste of money.
