Let's say you're a new property manager and your tenant just moved in on the 16th of the month, but you don't collect their first rent payment until the 1st of the next month.
How can you make sure the rental property is paid for in that short amount of time? Easy, with prorated rent payments.
What is Prorated Rent?
Prorated rent is a small rent payment that is less than the full month, usually charged when a tenant will move in or out in the middle of the month. This allows tenants to only pay for the exact days they are on the property instead of the entire month.
Since tenants rarely find a place to call home on day one of the month, you can use prorated rent to make up for the number of days the tenant spends in the rental before their first rent payment.
Prorated Rent vs. First Month's Rent
Keep in mind, prorated rent is different than first month's rent, which is typically the full monthly rent paid by the tenant at the time the lease agreement is signed. First month's rent is usually the full amount while prorated rent is a partial rent payment.
Many landlords offer prorated rent for fairness, although this is dependent on the lease and local laws. If a new tenant has questions, they should refer to the lease agreement and landlord.
How to Calculate Prorated Rent
To find the prorated rent amount, you don't need to jump to a prorated rent calculator. It's a pretty straightforward process, although you want to make sure the prorated rent amount charged is accurate.
Prorated Rent Calculator
To calculate prorated rent manually, simply do the following:
- Calculate the daily rent rate based on the monthly rent
- Multiply: (daily rent rate) x (days the tenant occupied or will occupy)
This works for most landlords and property managers who want to determine the prorated rent amount. Keep in mind that the daily rent rate will change based on several factors:
- Years that there is a leap year, you'll want to calculate the daily rent rate by multiplying the monthly rent by 12 and dividing that number by days of the year (366, in this case)
- For short-term leases, you'll want to focus on month-specific daily rates. To calculate this type of prorated rent, divide the monthly rate by the total number of days in the month.
Prorated Rent Example Scenario
Early Move-In Day: If a tenant moves in before the lease agreement starts, the daily rent for a $1000/month contract in May would be $1000/31 = $32. If the tenant planned to stay 16 days, the prorated rent would be $32 x 16 = $512.
First Month's Rent Example Scenario
Late Move-In Day: Often, if the tenant's move-in date is on the first of the month and they move in a few days after, the first month payment would cover the total.
What is the Banker's Month Method?
Another way to calculate prorated rent is banker's month, which is a simplified method similar to a "baker's dozen." Instead of using the average number of days in a month to calculate the daily rental rate, you can divide the monthly rent by 30, the number of days which make a "banker's month."
For example, if a tenant has a monthly rent of $1,000 and plans to occupy the rental property for 20 days this month, the prorated amount would be $666.66.
Formula: $1,000/30 = 33.3333. Then, 33.333 x 20 = 666.66
Understanding Prorated Rent Laws
While there are no national laws regarding prorated rent, several states have laws regulating rent control, which includes security deposits, total move in costs for tenants, and rent amount that can be charged, which all affect prorated rent in one way or another.
For example, Fair Housing Laws indicate that landlords cannot charge different amounts of rent to tenants based on race, religion, or origin.
Always check your local tenant laws and fair housing laws to ensure you're staying compliant and asking a fair prorated rent amount.
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Prorated Rent FAQs
How does prorated rent work?
Prorated rent is the amount of rent a landlord charges a tenant for occupying a rental unit before or after an agreed-upon lease term. For example, a tenant could move in or move out at any time of the month, and instead of paying for the full monthly rent, landlords can offer a prorated rent for the calculated amount based on the number of days the tenant occupied the rental.
When can renters ask for prorated rent?
Renters can ask for prorated rent based on if they are moving in our out of the rental on a day other than the first of the month. The lease may determine if prorated rent is provided by the landlord and if the tenant qualifies.
How do I calculate prorated rent?
To calculate prorated rent, divide the total number of days in the month to get the daily rent amount. Then, use the daily rent amount to calculate prorated rent for the tenant.
You can also use a prorated rent calculator, just be sure to double check the days and rates so that you're charging a correct and fair prorated amount.
Should landlords include prorated rent in the lease agreement?
Yes, we recommend including the prorated rent amount in every rental agreement along with security deposit information and other financial details. That way, if you have a tenant who plans to move in or move out days before the first of the month, you'll be on the same page even before the lease starts.
For a customizable lease, use our attorney-approved, state-specific rental agreements to ensure you are protected with a secure, legally binding document.
