Landlords in New York make over $70K each year, which is above the national average. With such a positive outlook, it's no surprise that more people are interested in buying an investment property. But, managing rentals isn't always a simple process- there's a bit of math involved from the beginning.
For example, you charge your tenants a fee each month for rent. However, if they move in or out before the end of the month, you’ll need to prorate their rent so they only pay for the days they lived there. But, calculating prorated rent is easier than it seems.
What Is Prorated Rent?
Prorating is the act of distributing or dividing something proportionally. In terms of rental agreements, this means that you should only charge your tenants for the time they spend using the unit. Since most tenants do not move in and out on the first of the month, you end up offering them prorated rent rates on their move-in and move-out payments.
Why Should I Offer Prorated Rent?
Prorated rent makes property management easy and effective. It also helps establish a natural flow of incoming and outgoing tenants. If you don't offer prorated rent, tenants can only move in and out on the first and last days of the month, respectively.
But, moving doesn't always happen on a strict schedule. This can be frustrating for tenants who don't want to wait a month to move in, or who have to move out mid-month and lose a whole month's rent. Offering prorated rent gives tenants more budget for rent and flexibility while making your property more attractive.
How to Calculate Prorated Rent
Calculating prorated rent comes down to understanding the cost of rent per day at your property. To calculate prorated rent, start by looking at the per-month cost you and your tenant agreed to in the lease.
Then, divide that by the number of days in the month. Note that the daily charge of rent fluctuates a bit depending on what month it is because there are between 28 and 31 days in each given month. Prorate the rent based on the month you are charging for.
After you find out the daily rate, multiply it by the number of days your tenant will reside in the domicile. For example, if you charge $1,200 a month for rent and your tenant moved in on July 15th, then you can prorate the rent as follows:
- $1,200 ÷ 30 = $40 per day
- $40 x 14 = $560
The rent they owe you at move-in is $560. Every month thereafter until they move out, you can charge them the full amount. Alternatively, you can use a rent calculator online to help you calculate prorated rent.
Can I Hire Someone to Manage My Properties?
Many real estate investors want a rental property as a side hustle rather than taking on a full-time role as a landlord. Especially when calculations like prorated rent come into play. That's where property managers can help.
Veno Properties specializes in property management in Saratoga Springs, Troy, and surrounding areas in New York. Our full-service property management team can help you with everything from rent collection to emergency maintenance. Check out our services online and schedule your free rental analysis today.
