Guide to Prorating Rent

Not every tenant is going to move out or move into a rental unit on the first of the month. When a tenant moves into a rental in the middle of the month, rent has to be prorated, which is the amount of money a landlord charges a tenant when the tenant is only occupying a rental for part of the rental period. Prorating rent can be tricky because different methods can lead to different rates.

prorate rent

There are two main methods to prorating rent. The first method is based on prorating a rental unit based on a yearly lease. According to this method, a month’s rent is multiplied by the months in a year (12) which is then divided by the days in the year (365). Then the result is multiplied by the days the tenant is renting within the month. See the equation below.

( ( Mo. rent * # months in year ) / # of days in year ) * # of days tenant is paying for = Prorated Rent

The second way to prorate rent is based on the numbers of days a tenant is renting within a given month. In this method, the monthly rent amount is divided by the number of days in that month and then multiplied by the days the tenant is renting within the month.

( Mo. rent / # days in Mo. ) * # of days renter is paying for = Prorated Rent

While both methods appear very similar, there are some key differences between the two calculations. The first difference is with option two the variables in the equations can be different from month to month. Since days in a given month vary, the number of days in a month can range anywhere from 28 to 31. Therefore the per day rental price changes from month to month. For example, someone that moved into a $2000 a month rental on February 14th would pay about $1000 ($71.42 a day for 14 days) compared to a tenant that moved into the same rental on August 14th who would pay about $1097 ($64.51 for 17 days). However, if one uses the first option the cost per day to rent the unit does not change. For example, someone that moved into the unit on February 14th ($65.73 a day for 14 days) would pay about $921 in rent, while someone that moved in on August 14th would pay $1118 ($65.73 a day for 17 days) in rent.

From the example above one can see that factors with the equations can vary considerably depending on what equation is used and the length of the month. In addition, one can also observe that depending on the month one equation may be more beneficial to the tenant for certain months of the year and the same equation may be more beneficial to the landlord on the other months of the year.

Therefore it is important that landlords and property managers follow their state and local specific rules about prorating rent. Furthermore, to reduce any ill feelings about the prorated rate, landlords should make it clear before the lease is signed what the prorated rate will be and what equation is used. In addition, to avoid any potential ill feelings or difficult math questions a landlord can choose to give a free day which may cost money in the short term but will likely be worth it in the long run.

This post is provided by RISSOFT Residential and Commercial Property Management Software, specializing in innovative and cutting-edge property management software for all 50 states. Request a demo or contact us today to receive more information.

Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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