How to calculate prorated rent. 3 popular methods of determining prorated rent.

There are 3 common methods of calculating prorated rent:

1. Prorate based off of actual number of days in the month

2. Prorate based off of assuming a 30 day month (for every month)

3. Prorate based off of the actual number of days in the year

 

1. Prorate based off of actual number of days in the month

This is the most common method for residential rentals.

Step 1 – Determine how many days the tenant will be at the property.  Make sure to count the day they move in.  

Example:  Tenant moves in on August 8th.  Total days = 24(31 days in August, 7 days they are not there, 31-7=24)

Step 2 – Calculate the daily rate by dividing the rent by the number of days in the month.

Example: Rent is $1200 per month.  Month is August (31 days).   $1200/31 = $38.7096. . . per day in rent (Don’t round yet.)

Step 3 – Multiply the number of days by the daily rate to get the prorated rent due.

Example:  24 days X $38.7096. . . per day = $929.03 prorated rent for August

 

2. Prorate based off of assuming a 30 day month (for every month)

This method used to be pretty common but has now been mostly replaced by the method #1 above.

Step 1 – Determine how many days the tenant will be at the property.  Make sure to count the day they move in.  

Example:  Tenant moves in on August 8th.  Total days = 24(31 days in August, 7 days they are not there, 31-7=24)

Step 2 – Calculate the daily rate by dividing the rent by 30

Example: Rent is $1200 per month.  Month is August (31 days).   $1200/30 = $40.00 per day in rent

Step 3 – Multiply the number of days by the daily rate to get the prorated rent due.

Example:  24 days X $40.00 per day = $960.00 prorated rent for August

 

3. Prorate based off of actual number of days in the year

This is the most common method to calculate rent during the sale of a rental property (when transferring rent from one owner to another when the closing date of a sale takes place in the middle of the month)

Step 1 – Determine how many days the tenant will be at the property.  Make sure to count the day they move in.   Example:  Tenant moves in on August 8th.  Total days = 24(31 days in August, 7 days they are not there, 31-7=24)

Step 2 – Calculate the daily rate by multiplying the monthly rent by 12 (to get annual rent) then dividing by the number of days in the year (typically 365).

Example: Rent is $1200 per month.  $1200 x 12 = $14,400 per year in rent.  $14,400 per year / 365 days in year = $39.45 . . . per day in rent (don’t round yet).

Step 3 – Multiply the number of days by the daily rate to get the prorated rent due.

Example:  24 days X $39.45. . . per day = $946.85 prorated rent for August


As you can see each method will derive a slightly different rent amount. It is best to stick with one method – which for most residential rentals will be method #1.

There are now some cool online rental calculators you can use to do the math for you.  This rental calculator uses method #1 above.  There is also neat landlord software like Turbo Tenant to help with the entire rent process.

Which method do you use?  Have a question on rent pro-rating?  Leave a comment below . . .