Although real estate legislation provides ample guidance on the relationships between landlords and tenants, there are times when you might need to use your discretion as a landlord.
One of these instances is when a tenant wants to occupy your investment property on an unusual date, i.e., not the first of the month. Since it's never wise to turn eager tenants away, it's best to charge them prorated rent in these circumstances.
Read on to discover how property managers make light work of calculating prorated rent.
Reasons to Calculate Prorated Rent
Landlords aren't obligated to prorate rent unless their tenant vacates the unit under the Unfit Premises Act.
The most common situation where you'd consider calculating prorated rent is when a tenant wants to occupy your unit earlier than expected. If you can accommodate them, it's worth working out a partial payment for that month.
Alternatively, if you own a single unit, you can simply change the rent due date to coincide with their move-in date. So, if they took occupation on the 17th, their rent would be due on that day every month in the future.
If you own more than one rental unit, this can get confusing, so it's best to charge the tenant prorated rent instead.
Other times, a tenant might want to vacate the unit early. However, many landlords are willing to accommodate these tenants as an act of good faith, especially if they already have a new tenant lined up.
Prorated Rent Calculation Methods
Your lease agreement details determine how you will calculate prorated rent, if at all. If you decide to prorate rent, accurate tenant billing depends on determining the cost of one day's rent.
There are two ways to do this, depending on whether you have an annual lease agreement or a month-to-month lease agreement in place.
Rent Calculation for Annual Leases
This is the simplest calculation for prorated rent. It involves multiplying the monthly rental cost by 12 and dividing it by 365. You'll divide the total by 366 in a leap year.
This calculation yields the value of a single day's rent, which you can multiply by the number of days that the tenant will occupy your investment property before your usual billing day.
Calculations for Month-to-Month Leases
Determining the value of a day's rental for a month-to-month lease involves a little more math. This is how you do it:
- Count the number of days in each month of the lease
- Divide this number by the number of months the tenant occupied the unit
- Divide the monthly rent by this number
The answer is equal to the daily rate for your rental unit, which you can use to calculate the amount due.
Hire Expert Property Managers in Utah
Although it's relatively simple to calculate prorated rent, you won't need to do these sums if you've hired Murray, UT, property managers to oversee your investments.
PMI Wasatch Front comprises a team of experienced property managers committed to providing exemplary service for our tenants and landlords. We are backed by a franchise with over 20 years of experience in Utah real estate and offer a full range of services to ensure the profitability of your investment properties.
Browse our blog for more property management tips, and let us help you grow your Murray rental business.
