Offering Prorated Rent: What to Know

By Alicia Geigel on December 30, 2021

As a property manager, there are a few things you always want to guarantee: satisfied tenants, issue-free units, and most importantly, paid rent each month. Typically, you would collect rent on the first or end of the month and expect to receive rent for the entirety of the month, given that your tenants both moved in on that day and have stayed that long. While this is the usual case, this doesn’t mean that this doesn’t come with exceptions. In the case that a tenant moved in in the middle of the month, or moved out in the third week of the month, for example, you’ll want to consider prorated rent.

In the renting world, you want everything to be straightforward and by the book, but this is not always the case. Though it sounds intimidating, offering prorated rent to your renters can be a fair way to adjust the rent to specific circumstances and needs while also maintaining consistency in your income.

If you are a property manager, here is everything to know about prorated rent, from what it is to how to calculate it for your next tenant’s rent.

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What is Prorated Rent?

Put simply, prorated rent is rent that is calculated proportionately. This means that rather than charging the tenant with a full month’s rent, you would charge them only for the days that they occupied the unit (which would be less than 30 days). Kristi Mergenhagen of Rent Prep elaborates on this, saying, “Prorated rent is when you divide the total monthly cost of rent out to a per-day cost. This cost is then charged to a tenant for the number of days they are occupying the property rather than them paying for the entire month.”

One additional piece to consider is the security deposit that the tenant put down before renting. It is likely that they gave some type of security deposit, so the prorated rate would apply to the first month of occupancy. If the tenant moved in on December 20th, and the due date for rent is January 1st, then the tenant would pay the prorated rent rate for the remaining days of December once they started occupying the unit.

How Is Prorated Rent Calculated?

There are a few different methods that you can use to calculate rent, all relatively simple and straightforward. First, start with the cost of rent, then divide that number by any of the following, whichever makes sense based on the agreement with your renters:

  • The number of days in the current month
  • The number of days in the average month
  • The number of days in the year

For example, using the first method, if rent was $1,200 and the month is December, divide 1,200/31 (as there are 31 days in the month) and get $38.71. This number is the daily rate of rent and what the tenant would thus be charged.

What are the Benefits of Offering Prorated Rent?

  • Working with tenants by offering prorated rent can improve your relationship with not only these specific tenants but all your tenants. Showing that you are a flexible and fair property manager will help to maintain a trusting and honest tenant/property manager relationship, and thus make your job a lot less stressful. If you can trust your tenants, you’ve got it good.
  • Prorated rent can also work in your favor, as you can charge tenants for days that they occupy your unit past their lease. When it comes down to the end of the lease, rather than letting a day or two go by free of charge, you could charge rent for these days, thus giving you a few extra days of income. Whether you decide to do this or not is entirely up to you, but it is nonetheless an option when prorating rent.

What Should the Lease Look Like?

One important element that you don’t want to neglect in this process is including the specifications of the prorated rent in the lease. Andrea Collatz of MySmartMove suggests, “Put your prorating policy in writing or incorporate it into your lease contract, so there are no surprises or conflicts down the road.”

In terms of the technicalities of the lease, simply take your standard lease agreement, and add a lease clause to it, detailing the prorated rate each day, what the rate is based on, the days that will be charged, when the rate ends, and how the rent will be paid. Including this in your lease sounds tricky, but it is pretty straightforward once you have the necessary information.

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Image via Pexels 

Considering prorated rent may not be the usual when it comes to your lease agreements, but doing so can have benefits for both you and your tenants. While it seems complicated at first, figuring out prorated rent is simple, just follow the above tips for a smooth rental experience.

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