Complete Guide to Using a Prorated Rent Calculator

Managing rental payments as a property manager can be simple when things are running as usual, but what about months when you have a tenant moving in or out? Unless they arrive on the first day or leave on the last day, they can request prorated rent.

How do you prorate rent, what is the calculation, and what else do you need to consider for the first or final billing date? DoorLoop has put together this comprehensive guide to answer your questions and make things a little clearer.

What Is Prorated Rent?

‍Let's start with the most obvious question: what is prorated rent?

Put simply, prorated rent is an adjusted rental payment amount for when tenants will only be occupying the property for part of the month. The most common examples of when a tenant requests rent proration for a partial month are when they move in or out.

Why Should Property Managers Prorate Rent?

‍One of the most important things in property management is maintaining a good relationship between the tenant and the property manager. Prorating rent is not a landlord's legal responsibility, but it helps in fostering a positive relationship, ensuring tenants are satisfied, and making them more likely to comply with other property rules.

How to Calculate Prorated Rent?

‍Calculating prorated rent is fairly simple- especially when you use a prorated rent calculator. Even without one, you can figure it out yourself using the following process.

Determine the Monthly Rent Amount

‍How much is the total monthly rent normally? The full month's rent is the first thing you need to work out, which should be straightforward even if you don't usually follow a monthly rent schedule.

If tenants normally pay bi-monthly, divide the amount in two. Annual contracts should be divided by 12, and so on.

Those who collect rent on a bi-weekly billing cycle can calculate the total rent per month by dividing the bi-weekly amount by two to get the weekly rent, then multiplying it by the number of weeks in that year. However, it is easier to work out the daily rent if you charge weekly or bi-weekly.

Divide By the Number of Days in the Month

‍Once you know the monthly rent amount, you should divide it by the number of days in the month that your tenant is moving. If you are weekly or bi-weekly, divide the amount by seven or 14 respectively.

This gives you the daily rent amount.

Figure Out How Many Days the Property Will be Occupied

‍Next, multiply the daily rent by the number of days in the month that the tenant will be occupying the property. This applies whether they are moving in or out.

Depending on the rental contract and terms of the lease, moving days may or may not be included in the prorated amount. This is up to you, but it is important to make it clear to the existing tenant or new tenant whether or not they will be charged for that day.

Multiply the Daily Rent Amount by the Number of Occupied Days

‍The final calculation is simple:

Daily rent amount x Number of Days Occupying the Property = Prorated rent

Just multiply how much rent is owed per day by how many days the rental unit will be occupied.

Alternative Prorated Rent Calculation Method

‍Some people find it easier to calculate prorated rent by determining the annual rent and dividing it by 365 days. That way, you don't need to worry about the different days in a month or weeks in a year- it really is quite a good system.

All you need to do is multiply the monthly rent by 12, then divide that figure by 365. You can then continue the calculation the same way as before.

What Factors Affect Prorated Rent?

‍Prorated rent calculations are one of the simpler things to work out in the real estate world. Only a few variables affect the final figure.

Here is everything you need to input into a prorated rent calculator.

Monthly Rent Amount

‍The main factor that impacts prorated rent is the amount you charge in a normal month. Your entire calculation is based on this, so it is pretty important.

Days in the Month

‍Some months have more days than others, so working out how much rent your tenants pay per day depends on the month. In February, for example, the daily rent is more than in November.

You should calculate prorated rent based on the days in the month that your tenant is moving in or out.

Total Days the Tenant is Occupying the Property

‍At what point in the month your tenant is arriving or departing also matters.

If they are moving in on the 5th of June, they will pay for 26 days. Tenants moving out on the 5th of June will only pay for the five days (or four, depending on the terms in the lease agreement).

Additional Costs

‍How much a tenant needs to pay for their first month's rent or last month's rent also depends on the additional costs. Although this doesn't impact the actual calculation, it affects how much they need to pay in total.

Some possible moving-in costs include parking fees, security deposit, pet deposit, and anything else that is included in the lease. Make sure you include these in the total prorated rent amount so they know how much to pay on or before the move-in date.

Moving out costs may include cleaning fees, costs to cover damage or outstanding bill payments. These costs should be added to the total they should pay on their final monthly rental bill.

Examples of Prorated Rent for Real Estate and Rental Properties

Prorated rent payments are only really leveraged when a tenant is not under a lease agreement for an entire month, but the exact circumstances can vary.

In the simplest situations, you have someone moving in or out, and that is it.

You may also have a situation where the month is split, with a move-in happening immediately after the move-out. These two things rarely happen on the same day to allow time for cleaning and preparation, but it is not unheard of.

Usually, the landlord charges the new arrival for the change-over day, not the person moving out.

Utilizing Prorated Rent as a Real Estate Investor

Prorated rent payments are only really leveraged when a tenant is not under a lease agreement for an entire month, but the exact circumstances can vary.

In the simplest situations, you have someone moving in or out, and that is it.

You may also have a situation where the month is split, with a move-in happening immediately after the move-out. These two things rarely happen on the same day to allow time for cleaning and preparation, but it is not unheard of.

Usually, the landlord charges the new arrival for the change-over day, not the person moving out.

Is There a Good or Bad Prorated Rent Amount?

‍Because of how you calculate prorated rent, there isn't much room for movement, and the cost will entirely depend on when your tenant is moving.

That said, you could make it part of the rental agreement that a minimum amount of rent is owed for the final month- depending on local laws in your area.

If you are legally allowed to do so, you can stipulate that at least two weeks' rent is owed on the final month of occupation. Some landlords do this to avoid missing out on too much rent if a tenant leaves suddenly and there is no time to fill the vacancy.

Having this in the lease can be good for you, as it limits your losses. However, some people see it as an unappealing clause and may argue that they shouldn't have to pay for two weeks if they are only staying for two days.

Sometimes, refusing to fairly prorate rent to only the days when the tenant is living there is not worth it. It can damage landlord-tenant relationships and put a potential tenant off renting from you.

Make sure a minimum prorated rent amount (if applicable) is clearly stipulated in the lease agreement to avoid disputes on move-out date.

Limitations to Using a Prorated Rent Calculator

‍Because the prorated calculation is pretty simple, there are not many limitations to using a calculator. If you calculate the prorated rent using accurate numbers for each variable, the result should be accurate.

The only exception is if you use a calculator that does not allow for other move-out or move-in costs. You would need to add these on yourself, although many prorated rent calculators do include this.

Other Things to Know

• New tenants should request prorated rent for their move-in month before they sign the lease. That way, you are in clear agreement about the expectations and how much exactly is owed. From both sides, it is beneficial to have the agreement written into the lease. Once it is signed, the amount stated is legally binding.
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• You should also be clear about the other move-in costs well in advance. Most landlords specify whether or not any deposits are required (if so, how much), when the rent for month number one should be paid, and what happens thereafter.
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• Don't forget to account for the leap year! If you are prorating rent for a year with an extra day in February, you need to include it. Those using the annual calculation method should divide the yearly amount by 366 instead, or the monthly rent proration in February should be divided by 29- not 28.
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• If the daily rent doesn't come to a round number, it is best practice to round from the third decimal point- going down for four and below and up for five and above. It may seem pedantic, but dollars and cents matter, and it is better to avoid any arguments right before a tenant moves in or out.
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• It is typically expected that landlords will accept a prorated rent request, but it is not a legal requirement in most places. If you have someone moving out in the middle of the month, you still have the right to charge the total rent amount, but it may not be in your best interest.

How Can DoorLoop Help?

‍Managing rent just got a whole lot easier. DoorLoop is the ultimate tool for landlords who want to work smarter, not harder and are looking for a more convenient and effective way of doing things.

You can streamline your apartment or home rental business and manage your portfolio more efficiently than ever before with DoorLoop's comprehensive solution.

Of the many great features, the rent management tools stand out. You can put rent on autopilot- collecting payments online, providing a portal for your tenants to check bills and make requests, and keeping track of all incomings with a full accounting suite.

DoorLoop optimizes the rental property manager world in every way- taking the hassle out of daily operations and giving you more time to focus on making your business a success.

Try it today by scheduling a free demo!

Summary

‍Prorating rent is a simple calculation made using easy-to-find numbers. Using an online prorated rent calculator is the fastest way, but you can also use a normal calculator if you want to.

The most important thing is to calculate the rent from when the billing cycle starts and to adjust the owed amount accordingly.

Check out DoorLoop's other rental property calculators for more of your real estate needs!