Rent is typically a property manager’s primary source of income. Receiving consistent rent payments from tenants is crucial in order to maintain a healthy cash flow. When units are left vacant or tenants miss even one rent payment, the health of your cash flow is at risk.
In order to lessen the effects of sometimes unavoidable situations, offering prorated rent is the best available option. When a tenant moves in or out before or after the dates outlined in their lease, charging them prorated rent allows you to maintain a steady income and offers them an easier transition.
Figuring out what exactly prorated rent is and how to charge tenants accordingly can be overwhelming. To help you feel confident offering this specialty service, we’ve created a landlord’s guide to prorated rent. This way, you’ll know exactly what to do the next time a situation arises.
What is Prorated Rent
Essentially, prorated rent is a rent payment for a partial month. There are various reasons why a tenant may need to pay for a partial month, which you should take into consideration before agreeing to a prorated amount, but we’ll cover that below.
Partial months aren’t the only reason a landlord might offer a tenant prorated rent, though. A tenant who is in a tough financial situation might ask for rental accommodations, and providing them a prorated amount can help them re-establish stability and keeps you from losing out completely.
You might also provide a tenant with a prorated amount if there is some considerable issue with the unit. Say a pipe bursts and your tenant has to stay with a friend for a week while your team tends to the water damage. In such a situation, it would be fair to offer the tenant a deal on their rent due to unforeseen inconveniences.
When to Charge Prorated Rent
You always have the choice to deny a tenant prorated rent if you deem their reasons to be insufficient. If they’re asking because they’re moving out early, for example, you may decide not to offer them a discounted fee. They aren’t breaking the lease, after all.
If a tenant is asking for accommodations due to financial troubles, you might also decide it’s best not to prorate their rent. This is especially true if it is a repeated request, in which case you should consider beginning the eviction process.
But if a generally reliable tenant needs a little assistance due to extenuating circumstances, complying with their request is not only the courteous thing to do, but it will strengthen your tenant-landlord relationship, encouraging consistency in the future.
How to Calculate Prorated Rent
In the case of a late move in or an early move-out, it is fair to break down the tenant’s monthly rate and charge them per day. To see how this works, let’s look at an example of a tenant moving in early:
Tenant’s monthly rent fee: $500
Tenant’s rent broken down to a daily fee: $500 / 30 days = $16.67 per day
Amount of additional days in the unit: 15 days
How much to charge for prorated rent: $16.67 x 15 days = $250
If a tenant is moving out early, you would do the exact same thing but only charge them for the days that they’ll be in the unit. The math turns out to be pretty simple.
For a tenant asking for discounted rent due to an inability to pay, or for a tenant who deserves accommodations for unforeseen inconveniences, the discounted rate is really up to you and what you feel is fair.
You might be concerned with how prorated rent will interfere with your bookkeeping and rent collection process. If you choose property management software with customizable rent settings, however, you’re able to easily go in and adjust an individual unit’s rent for the month. The property management software also automatically documents all transactions, so you don’t have to worry about adjusting your financial bookkeeping.
Leases, Laws, and Prorated Rent
In most jurisdictions, landlords aren’t required to offer prorated rent to a tenant who is moving out early or can’t afford to make their monthly payment. When a tenant signs their lease, in which their rent price and move-in dates are outlined, they legally commit to following the terms of the agreement.
If you know in advance that a tenant will need to move in before the date of their first rent period, however, it is best to include their adjusted move-in date and prorated fee in the lease. This way, you have paper trails of all agreements and financial transactions.
Prorated rent offers a viable solution for both landlords and tenants in situations where a full month’s rent either can’t or shouldn’t be charged. It ensures that you maintain the health of your cash flow, even when specialty circumstances arise. It might have seemed like a hassle to figure out, but hopefully, you’re now feeling confident in your ability to offer prorated rent in the future.
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