How Do You Calculate Prorated Rent?

How Do You Calculate Prorated Rent?

Over the past year, half of all U.S. renters have struggled with rent. This makes every renter who's ready to move in ASAP worth their weight in gold.

There's one potential obstacle here, though. If someone moves in on, say, the 15th, you'd ask them for a partial rent payment for that month. This payment is best known as prorated rent, and it can be tricky to calculate.

Want to determine the correct prorated rent for your Denton, TX property? Here's how professional property managers handle this task!

When Should You Prorate Rent?

In Texas, no law states the rent payment date must be on the first of the month. As such, many landlords opt to make rent payable on the day a new tenant moves in. This is particularly common in a tough market.

Typically, landlords will only prorate rent for the first month. After that, they'll make rent payable on the first of each month. This helps them keep all units on the same schedule and avoid collecting rent throughout the month.

Prorated rent also applies in moving-out situations. For instance, some tenants move out before their lease expires at the end of the month. Others may stay a few days beyond the lease term to ensure everything's in order.

Calculating Prorated Rent

Regardless of when you apply prorated rent, you'll first need to calculate it. This involves determining a percentage of the rent based on the length of a tenant's stay. Here are the two main ways you can get this number.

Number of Days in a Month

This method is easy to calculate and explain to tenants. Simply divide your monthly rent by the number of days in the month your tenant moves in. Multiply this number by the number of days they'll stay in the rental property.

Let's say a tenant moves into your Texas property on the 25th of April and your rent is $1,200. As a reminder, April has 30 days. In this case, the formula for prorated rent will be: (1,200 / 30) x 5 = $200.

Number of Days in a Year

For this method, you'll take your monthly rent and multiply it by 12. This will be your total yearly rent. Divide this by 365 to determine the daily rent, then multiply it by the number of days your tenant will stay in the unit.

Let's go back to the above example, with the tenant moving in on the 25th of April. This time, the calculations would look like this: (1,200 x 12) / 365 x 5 = $197.

Which Method Is Better?

Like in most places, rental demand in Denton, Texas is higher in the summer. At these times, it's often better to use the first method. Most tenants also prefer this option, as it makes the rent collection process more transparent.

In general, you should also use the first method when prorating month-to-month or six-month leases. For year-long leases, the second method becomes a bit easier to calculate.

How Property Managers Can Help

Fair rental practices are a big part of establishing a good landlord-tenant relationship. The above guide will help you apply this approach to your prorated rental policy!

Need some help with calculating your prorated rent? At PMI United, we're part of a franchise that has helped landlords like you for over 20 years! Contact us here to learn more about our property management services!