Managing Your Rentals - Charging Prorated Rent

In the course of occupying your rental properties, you will undoubtedly have many tenants that will move in sometime during the month and not on the 1st of the month. This, of course is a good thing because you want to get your units occupied as soon as possible. Much better to have a qualified tenant move in on the 20th of the month than have them wait until the 1st of the next month. But how do you deal with the prorated rent for this initial, partial month?

The formula for calculating prorated rent is quite simple.

Follow up:

Total Rent / 31 days = Daily Rent
Daily Rent * Number of Days = Prorated Rent

For example, if your tenant moves in on the 20th of July, they need to pay for 11 days of rent. You are charging $1099 for monthly rent.

$1099 / 31 days = $35.45/day
$35.45/day * 11 days= $389.95

Now, here's the important part. When your tenant moves in on the 20th, you don't merely collect their security deposit and the prorated rent of $389.95. You should collect a full first month's rent of $1099 along with their security deposit. When the 1st of the next month (August in our example) roles around, then you collect the prorated rent of $389.95.

The reason you should do this is to protect yourself. While you are undoubtedly placing highly qualified tenants in your houses, you don't want to take the chance that a tenant will move in at the end of the month and then fail to pay rent when the 1st roles around. No matter what day of the month your tenant moves in on, you should always collect a full month's rent and then charge them the prorated fee for the following month.

Until my next post,

James