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How Do You Calculate Prorated Rent?

How Do You Calculate Prorated Rent?

Have you decided to rent out your property in Boise? It's ranked as one of the most popular cities in the country and will no doubt see increased growth in the coming years.

If you're a new landlord you might be confused about how much to charge for rent. One of the methods that you can consider is prorated rent. If you hire property managers, they'll often know how to do this for you.

In this guide, however, we'll show you the basics of calculating prorated rent for your rental property.

Here's how it works:

How Prorated Rent Works

Once you've determined a reasonable rental price, you can start promoting your home to potential tenants. Often, tenants won't move in on the first of each month. Rather, they'll move in once the month has begun.

The question then comes up: do you charge them a full month's rent? This is where prorated rent comes in.

You can charge them a discounted price when they move in. You can do the same if they move out without completing a full month during their final month. It's not required by law, but your tenants won't want to pay for a full month if they don't stay for that time.

Methods for Calculating Prorated Rent

Let's now look at the ways to calculate prorated rent. The first option is to calculate the daily rate.

The Monthly Rate

You'll take the monthly rate and then divide it by the number of days in that month. The result is the daily rate. You'll then multiply this amount by the actual number of days the tenant will stay in that month.

Let's presume the rent is $1,000, and they move in on January 5th. So for a month that has 31 days, they'll stay for 26. The formula is as follows:

$1000 (rent) divided by 31 (days in January) = approximately $32.26 per day.

$32.26 multiplied by 26 days = $838.76. This is the amount you'll charge for January.

The Yearly Rate

The other method is to calculate by year. If you sign a lease for that time, this is often the best way.

You'll take your monthly rent price and multiply it by 12 (months). Afterward, you divide it by 365. The final amount is the daily rate. Let's use the same $1,000 price from the previous example:

$1,000 multiplied by 12 = $12,000.

$12,000 divided by 365 = approximately $32.88

If they move in on January 5th, the cost for that month would be $32.88 multiplied by 26. The total is $854.88.

The easiest option is to delegate this task to property managers. They can also collect the rent for you.

Property Managers Can Help

Now you understand prorated rent and how it's more convenient for your tenants. Decide between the monthly or yearly rate for your calculation.

If your tenants move in or out without completing a full month, these are the best ways to calculate the rent price. If you want to skip the hassle, you can reach out to property managers.

1st Rate Property Management has 30 years of experience helping landlords throughout Boise. We'll be glad to assist you.

Contact us today!


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