Are you looking to invest in a rental property in Fayetteville, AR? The population growth has soared to just over 2% since the beginning of this decade.
You'll surely have no problem finding tenants at any time of the year. But this brings in a problem: what happens if a tenant moves in during the middle of the month? What happens if they leave before the month ends?
You can hire property managers to calculate and collect prorated rent for you. However, you should first know how to calculate this on your own.
Here's how it works:
Monthly Prorated Rent
The first way to calculate is by the monthly rate. Let's say you've charged your security deposit, and the tenant is now moving into the rental property. You can charge the first month's rent by calculating the daily rate by the number of days they stay.
Let's presume that a tenant, Raj, moved in on January 10, 2024. The month has 31 days in total. You'll first subtract the total number of days by the day he moves in:
31 days total - 10 (Jan 10th) = 21 days.
You'll next have to calculate the daily rate. Multiply the monthly rental fee by the total number of days in the specified month. Let's assume you're charging $3,000 per month:
$3,000 divided by 31 days = $96.77
This is the daily rate that Raj will pay as rent. Since he stayed for 21 days in January, the prorated rent he would have paid was $2,032.17 ($96.77 multiplied by 21).
Yearly Prorated Rent
If your tenant is signing a one-year lease, you may want to consider using this option. You'll take your monthly rental fee by 12 months. Let's continue with the previous example.
Raj will pay $36,000 for the full year: $3,000 multiplied by 12 months.
Next, you'll divide this amount by the number of days in that particular year. Since 2024 is a leap year, you'll divide by 366:
$36,000 divided by 366 = $98.36. This amount is the daily rate, which, as you can see, is higher than when you used the monthly method.
You'll then calculate the daily rate by the number of days Raj will stay in that particular month. Let's say he will leave on January 15, 2025.
You'll then multiply the daily rate by the number of days he will stay:
$98.36 multiplied by 14 days = $1,377.04. (Note: the day he leaves doesn't count as a day for charging rent).
Prorated rent gives your tenants the comfort of knowing they won't have to pay for a full month. To ensure smooth rent collection, it's always best to hire a property management company.
Find Your Property Managers
Now you know how to calculate prorated rent for your property in Fayetteville, AR.
You can choose either the monthly rate or the yearly rate, based on your preference. Prorated rent is a great option for tenants moving in or out when it's not appropriate to charge the full amount.
Allred Properties offers the best property managers for new and experienced landlords. With several positive testimonials endorsing us, we're sure we'll be able to help you build passive income from your rental properties!