How to Prorate Rent

By
Services for Real Estate Pros with HomePointe Property Management, CRMC
http://actvra.in/48lq

Many newcomers to property management as well as many tenants do not understand how to prorate a rent payment.  This comes up when a new tenant moves in mid month.  Most property managers want all rents due on the first of each month, so the question becomes, how do we figure out what amount of rent is due to accomplish that.

On move in, most companies, HomePointe included, have each new tenant pay a full months rent and the entire security deposit.  If the rent is $1200.00 and the deposit is $1200.00 then the tenant must pay $2400.00 to get the keys.  If the tenant moves in on the first day of the month, there is no figuring to do.  Each month thereafter the tenant will pay $1200.00.

But if the tenant moves in on the 20th of the month, the question is, what does the tenant owe on the first of the next month?  It is quite easy to figure out as long as you stick to the formula and thought process.

Figure it this way:  Every month is considered a 30 Day month, which is what we call a bankers month.  If the tenant moves in on the 20th, they were not in the property for 19 days.  30-19 =  11 Days they were in the property.  Now take the rent rate $1200 and divide it by 30 days (one month) = $40.00 per day.  $40 x 11 days the tenant had possession = $440.00.  That is what they owe for the second month.

Our rental agreement states that all rent for the month is due in full in advance on the first day of the month. So the entire $440.00 is due on the first of the tenant's second month of occupancy.

Now you can sleep well tonight dreaming of collecting the correct prorated rent from your tenant AND be able to explain it to them. 

Posted by

Robert A. Machado, CPM, MPM

HomePointe Property Management

Sacramento, Yolo, El Dorado, and Placer Counties

We manage residential and commercial property.

916-429-1205 x 105

rmachado@HomePointe.com

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Rainmaker
185,089
League City, TX - Worrell Team, REALTORS, GRI, CNE
Bayou Properties Realty - League City, TX

Robert, Some people are slower (or faster) than others!  Funny you should post this, but many needed the lesson!

March 23, 2009 04:42 PM #1
Rainmaker
251,689
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management - Sacramento Area

I have stopped being amazed at what people do not know.  There is a lot I do not know as well.

March 23, 2009 04:54 PM #2
Rainer
128,997
Justin Ukaoma
Vizion KC - Kansas City, MO
Kansas City Real Estate Investments

I'm glad that you posted this I've seen people prorating rent in several different ways.  They're probably the ones staying up wondering about their rents.

March 23, 2009 05:46 PM #3
Rainmaker
1,078,277
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

I pro-rate for the specific month since I use fixed term leases that end on the third Friday of the end month I usually have to calculate the first month and last month and add all $$$ together to get the total amount due for the lease term.

March 23, 2009 07:10 PM #4
Rainmaker
310,466
Leslie Prest
Leslie Prest, Prest Realty, Sales and Rentals in Payson, AZ - Payson, AZ
Owner, Assoc. Broker, Prest Realty, Payson,

We have always calculated a daily rate by taking the rent times 12 months and dividing by 365 days in the year. We've never had any objections, and as far as I know there is no "official" guidance from our state.

March 27, 2009 01:03 PM #5
Anonymous
Anonymous
Boundary Rental Management, LLC.

Thank-you for posting this, we are trying to decide how to prorate, and this seems like a simple way that won't be confusing for our tenants!

February 22, 2010 07:49 PM #6
Anonymous
Anonymous
SK

Are you suggesting that someone moving in the last day of February would pay 3 days of rent. Why not prorate according to the number of days in the month

April 14, 2010 05:22 PM #7
Rainmaker
251,689
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management - Sacramento Area

For someone moving in on the last day of Feb, we would simply charge them one day for Feb. and then all of March.  Common sense must prevail.

April 14, 2010 06:03 PM #8
Anonymous
Anonymous
Adam

Hi Robert, Thank you for the post. This is great info, however I am curious why you assume a 30 day month?  If it is a 31 day month in your example, the prorated amount would be $464.52 or if is was February of a non leap year, that same amount would be $385.71 assuming a move in on the 20th each time and a rent of $1200/month.  Pretty substantial difference from the $440 we would have charged.  Just curious. However I did find a great prorate calculator you may want to check out: http://www.freerentalsite.com/home/how-to-prorate-rent.asp   Thoughts?

August 06, 2010 02:40 PM #9
Rainmaker
251,689
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management - Sacramento Area

Sometime simplicity and mistake free rules.  I realize we lose up to 5 days of rent per year, but it is a convention that make things simple.  In your example, we do charge the same rent no matter what the length of each month is during the course of the lease (except the first one).  So, once moved in everything is the same. 

August 07, 2010 01:23 AM #10
Anonymous
Anonymous
yolana

I rented a room and my room mates, that person  gave me $385 and she left on the 11th so she was there for 11 days. i prorated  so its $35 dollars a day right???????????

November 10, 2011 12:27 PM #11
Rainmaker
251,689
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management - Sacramento Area

$385 divided by 11 is $35.

December 08, 2011 11:53 AM #12
Anonymous
Anonymous
Gayle

I live in the state of New Jersey and my rent is due on the 10th of the month.  My landlord sold the house and the new owners will be moving in.  If I move out on the 15th of the month, how much do I owe the landlord?

August 20, 2012 09:55 AM #13
Rainmaker
251,689
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management - Sacramento Area

Your rent is due on the 10th, but what period does it cover?  If you are paid through the 9th, you would owe the 10th through the 15th, which is 6 days.  I cannot tell you more without more information.

August 20, 2012 10:05 AM #14
Anonymous
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Rainmaker
251,689

Robert Machado

CPM MPM - Property Manager and Property Management - Sacramento Area
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