How to Calculate Prorated Rent

Written on July 11, 2014 by , updated on July 27, 2015

Prorated Rent

One of the most common questions that I receive from other landlords is “How do I calculate prorated rent?”

What is Prorated Rent?

Prorated rent is the amount of money a landlord charges a tenant when he/she is only occupying a unit for a partial term (month, week, etc).

Most commonly, it’s when the  landlord only charges the tenant for the number of days he/she occupies a unit, although the price is based on a monthly rate, not a daily rental rate – as daily rentals are often more expensive.

Why Prorate?

It’s the only way to be fair.

Prorating rent by the day is the most practical when a tenant moves in or out in the middle of the month, or is subletting to someone else.

For example, a tenant wants to move-in on July 17, for a lease duration of approx. 6.5 months. The landlord would charge a prorated amount from July 17th to July 31 (15 days), and then charge the full monthly rent amount on the first of every month thereafter.

Note: Cozy prorates the first month’s rent automatically, as part of our free online rent payment service.

Two Methods

There are two popular methods of calculating prorated rent and both are quite simple. One method is to prorate rent based on the number of days in the current month, and the other is to calculate rent based on the yearly rent total divided by days in the year.

Lets examine both methods:

1. Prorate by the number of days in the Year

Popular to some, this is technically the most accurate if dealing with a year-long lease. Although, I’ve found that this method typically confuses tenants, and I have to explain it multiple times.

( ( Mo. rent * # months in year ) / # of days in year ) * # of days tenant is paying for = Prorated Rent

Using a move-in date of July 17, and a monthly rent of $1,500, the equation would be as such:

( ( $1,500 * 12 ) / 365 ) * 15 = $739.73

If the current month has 31 days, a yearly prorated calculation will return a higher yield than a monthly calculation. However, if the current month has 30 days or less, the monthly calculation will be higher.

In all honesty, the extra cash is never worth the time it takes to validate the equation to the tenant, and in the end, they still tend to think I’m nickel-and-diming them – especially if their lease is not for a full year.

At this stage in the lease process, they probably haven’t signed a lease yet, so I’d rather go with the prorating method that leaves the best possible first impression.

2. Prorate by the number of days in the Month

This is my preferred method of prorating rent, and is easier to calculate.

( Mo. rent / # days in Mo. ) * # of days renter is paying for = Prorated Rent

Using a move-in date of July 17, and a monthly rent of $1,500, the equation would be as such:

( $1,500 / 31 ) * 15 = $725.80

The benefits of calculating prorated rent by the month are:

Accuracy:

If you’ve ever rented a unit month-to-month, you know that not all months are created equal.

I can charge a lot more for a monthly rental in July than I can in January. It’s all about supply and demand. Rent in July may be $1,500, but market rate for the same unit in January may only be $1,200.

Easy to Understand:

The majority of my tenants think in the “here and now”.

Many of them are young, just out of college, and live paycheck to paycheck. They are not typically familiar with thinking long-term or big picture.

Even if it’s cheaper for them if I prorate based on the number of days in a year, they feel more comfortable prorating it by the month. It makes them feel like they are only paying for what they use – which is how they live their day-to-day lives.

What about You?

I’d love to hear your stories about prorating rent.

Which method do you use and why? Answer in the comments below.

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226 CommentsLeave a Comment

  • Gale

    Question: Landlord asked me if wanted to move to different apt they own-they will just use my original deposit. Apartments are different priced. I will move to other apt on 16th of month. She pro rated rent like t his: old apt 615.00/31×15 (1-15th) new apt 925/31×17 (15-31)-Should she be charging me for 32 days?

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