What Is Prorated Rent and How to Calculate It

Ever had a resident move in or out mid-month? A scenario like this can create a wrinkle in your rent collection process. Prorated rent is a straightforward solution that ensures you receive fair compensation for the entire occupancy period, regardless of the move-in or move-out date.

Read on for an overview of this important rental concept. As a landlord it’s important to know things like how prorated rent works, how to calculate prorated rent, and the common questions you should have answers to. Let’s dive in!

What Is Prorated Rent?

Prorated rent is the portion of rent that residents owe based on the number of days they occupy a rental unit during a billing period. It ensures that residents pay only for the time they occupy the unit, while allowing landlords to charge renters fairly.

How Does Prorated Rent Work?

Prorated rent works by calculating a resident’s rent in relation to the number of days they occupy the space.

Even if your resident is moving in on the first of the month, you should discuss your stance on prorating rent (or how prorated rent works according to your lease) upon move-out to be one step ahead of the game. If you’re open to it, you could consider including a clause that specifies that the resident will only be required to pay the prorated amount if they move out earlier in their final month than anticipated.

Understanding When to Prorate Rent

Now that we've established the basics of prorated rent, let's dive into the various situations where it comes into play. Understanding how to prorate rent in these scenarios will help you ensure smooth transitions for both you and your residents, while keeping your finances organized and transparent.

Here are some instances where it could be beneficial for residents and landlords alike:

Move-in Mid-month

This is the most common scenario for prorated rent. Let's say a resident moves in on the 15th of a 30-day month. The resident would be responsible for a prorated rent amount reflecting the days they occupy the unit (15 days) – not the full month's rent. This can be a great way to attract residents who might be on a tight moving schedule or have a lease ending elsewhere mid-month. By offering prorated rent, you show flexibility and make your rental unit more appealing.

Move-out Mid-month

If a resident gives proper notice but needs to move out before the end of the lease term, prorated rent applies again. Say their lease ends on the 20th. You would calculate the prorated rent for the days they occupied the unit that month (20 days) and deduct that from their final rent payment. It's important to handle security deposits according to your lease agreement and state laws. Typically, you would return the deposit minus any deductions for unpaid rent (including prorated rent) or damages beyond normal wear and tear.

Lease Starts/Ends on a Non-standard Day

Sometimes, lease agreements might not begin or end on the first or last day of the month. This can be confusing, but prorated rent calculations still apply. Just use the same method – divide the monthly rent by the total number of days in the month and then multiply that daily rate by the number of days the tenant occupies the unit. For example, if a lease starts on the 2nd and ends on the 30th (28 days), the prorated rent would be slightly different than a standard 30-day month. While the scenarios above are the most common for calculating prorated monthly rent, there are a few additional scenarios that might require prorated rent calculations including:

• Rent Increases or Decreases: If the rent amount changes, the resident only pays for the days at the old rate before the change, and new rate after the change.
• Lease Extensions or Renewals: If the lease extends or renews, prorating rent ensures the resident only pays the old rate before the extension, and the new rate after the extension.
• Partial Use of the Property: If a resident only uses a portion of a property, prorating rent ensures they only pay for the part they use.

How to Calculate Prorated Rent

Ready to put your prorated rent knowledge into action? Here's a simple step-by-step guide on how to determine the prorated rate for yourself and your residents:

Prorated Rent Formula Breakdown

The formula for calculating prorated rent involves quick division. It involves the following:

• Monthly Rent: This is the total rent amount you typically charge for a full month's occupancy.
• Number of Days in the Month: This can vary slightly depending on the month (think February vs. July) but most months have 30 or 31 days.

By dividing the monthly rent by the number of days in the month, we arrive at the Daily Rent Rate. This represents the cost of occupying the unit for a single day.

Daily Rent Rate Calculation Example

Let's say your monthly rent is $1,200 and the month has 30 days. Here's how to find the daily rent rate:

Daily Rent Rate = $1,200 (Monthly Rent) / 30 (Days in the Month) Daily Rent Rate = $40 per day

Move-in Scenario Calculation Example

Now, imagine a resident moves in on the 15th of the same month. Here’s how to figure out prorated rent:

Find the number of days they'll occupy the unit that month: 30 days (total) - 14 days (before move-in) = 16 days Multiply the daily rent rate by the number of days they'll occupy: $40 (daily rate) x 16 days = $640

Therefore, the tenant would owe $640 for the prorated rent for the second half of the month. Now that you have a better understanding of how to calculate prorated rent let’s look at whether or not you are required to prorate rent.

Are Landlords Required to Provide Prorated Rent?

In most cases, there's no legal obligation on the landlord's end to offer tenants an adjustment or any type of prorated rent. Residents shouldn't place any bets on settling a prorated rent agreement if they decide to move out early. As early move-outs are usually the resident’s decision, landlords may not feel obligated to adjust the amount due because the resident has already committed to that month.

Residents are in a much better position to negotiate prorated rent before they've signed their name on any dotted lines. That’s why it’s important to discuss these terms with a prospective tenant before signing the lease agreement.

Let Apartment List Handle the Heavy Lifting

Prorated rent keeps your finances on track, regardless of mid-month move-ins or move-outs. By understanding how to calculate prorated rent and incorporating clear communication within your lease agreements, you can ensure a smooth transition for both you and your residents.

Remember, managing multiple properties and keeping track of move-in/move-out dates and prorated rent calculations can be time-consuming. Let us handle the heavy lifting. Apartment List's advanced AI technology seamlessly matches your listings with highly compatible, ready-to-move renters. Our GenAI leasing agent, Lea Pro, can proactively qualify leads at scale – so you can focus on what matters most: providing exceptional service to your residents. Contact Apartment List today to discover how we can help you take your multifamily leasing to the next level!