Finding ways to reduce your workload is likely one of your top goals as a landlord. After all, landlords have demanding lists of things to do for their properties.
One way to simplify procedures is by making rent due on the first of every month for all your tenants.
How can you do this if people move in part-way through the month? Property managers suggest prorating rent.
Continue reading to learn what this means and how to calculate it.
Definition of Prorated Rent
What is proration? That's the first thing you must learn if you're interested in benefiting from prorated rent.
Proration means charging a tenant a partial month's rent. You can prorate rent when someone moves in on any day other than the first.
You can use proration for all your rental properties. However, you'll only need to do this when people move in on a day other than the first.
Reasons to Prorate Rent
Landlords use proration for three primary reasons.
First, it keeps all the rent due on the first. The tenant pays a partial month's rent for the first month. After that, they pay their full rent on the first of every month.
Keeping all your rent due on the first is an excellent rent collection strategy. It simplifies your work.
Secondly, proration may help you collect more money. You can allow a tenant to move in as soon as you complete the renovations of a unit. It decreases the number of days an apartment is unoccupied.
Finally, it helps you improve your landlord-tenant relations. When you collect more money and simplify your processes, you have less work. You'll prevent the health risks of stress and manage your company well.
How to Calculate It
While there are several ways to calculate it, most landlords use the monthly method. Prorating rent with the monthly method requires two simple calculations.
First, you must determine the daily rental rate by dividing the monthly rent by the corresponding days of that month.
For example, if a tenant moves in on May 10, they'll live in the unit for 21 days that month. That means they'll owe for 21 days of rent instead of 31.
If the monthly rental rate is $1,500, the daily rate is $48.39. They must pay you $1,016.19 when moving in on May 10 to cover the 21 days. This tenant will then pay $1,500 on the first of every month beginning June 1.
Of course, a property management firm can handle this task for you. Property managers aim to maximize profits by filling vacant units as quickly as possible. To do this, they often use the prorated rent strategy.
Hire Property Managers for Help
Property managers provide services for rental property owners. They manage rental properties and provide essential services that help rental property owners.
They can help you with prorating rent and much more.
PMI Chattanooga puts people first. We're a locally owned company offering property management services to rental property owners. We aim to maximize your profits, building stronger rental property businesses.
Reach out today to learn about our services.
