Did you just buy a great rental property? The next step is to start seeking out tenants, isn't it?
Well, you might want to wait for a moment. Have you decided how much you'll charge them? Have you set goals for how much you'd like to earn from your rental income?
One of the challenges you'll have is you might have tenants move in the middle of a month. If so, you might have to charge prorated rent. Property managers can assist you with this task.
For your reference, here's how it works:
The Yearly Rate
The first way to calculate prorated rent involves checking the daily rate based on a one-year lease. When calculating rent, don't include a security deposit or any additional fees.
Your first step is to multiply your monthly rental fee by 12 (months in a year). Afterward, you'll divide this amount by 365 (days in a year) or 366 (days in a leap year).
Let's suppose your monthly rental is $1,000. Here's the formula:
$1,000 x 12 = $12,000
$12,000 / 365 = approximately $32.88
This amount is the daily rate. You'll multiply this based on the number of days your tenant will stay in a given month. Let's say they move in on April 10th. The month is 30 days, and they stay for only 20 days.
The formula is $32.88 x 20 = $657.60
This is the prorated rent that you'll charge your tenant.
The Monthly Rate
Another option is to calculate the daily rate based on the days in a particular month.
Let's presume the tenant is arriving in July. July has a total of 31 days. Let's continue with the rate of $1,000 as your rental fee. You have to divide the fee by the number of days.
$1,000 / 31 = approximately $32.26
You'll then multiply this amount by the number of days they stay in that month. If they move in on July 10th, then they're spending 21 days in July.
$32.26 x 21 = $677.46
It's up to you to decide whether you want to offer the yearly or monthly rate. From this example, you'll see that you'll earn more from the monthly rate. However, your tenant shouldn't feel that you're trying to do whatever you can to receive more money from them.
If they're a responsible tenant, you might want to consider offering them a lower price. This can win over their loyalty and convince them to extend their lease. You can ask your property manager to calculate for you. The property manager will know the best rate to satisfy both you and your tenants.
Don't forget to keep track of your prorated rent payments. In such a case, you might have to pay a portion of the bills on your own. You'll need to be extra diligent with your accounting.
Property Managers Will Help
Now you know how to calculate prorated rent for your rental property. You don't have to do it on your own, as property managers can easily help you.
Axela Management is one of the leading property managers in the Northeast. We have several positive testimonials and offer a large number of services to landlords.
Are you interested? Reach out to us to learn more!
