What is Prorated Rent and How Do You Calculate It?

What is Prorated Rent?

Prorate comes from the Latin word pro-rata, which means proportionately according to an exactly calculable factor.

Prorated rent is usually used when it's the middle of the month, and the tenant needs to move in before the beginning of next month or may have a short-term lease.

As it is not always possible to rent or move-in a tenant on the 1st day of the month, here is a guide for you to calculate the prorated rent whether you are a tenant or a landlord.

How To Calculate Prorated Rent?

You can easily calculate prorated rent. However, deciding on which formula to use to determine the daily rate may take some consideration.

• Determine the daily rental rate.

• Multiply the daily rate by how many days the resident will occupy the unit.

Here, we will discuss possible ways for a landlord to calculate the prorated rent:

Number of days in a year

To calculate the daily prorated rent based on the number of days in the year, multiply the monthly rent by 12 months, then divide that number by 365 days: 

• Formula: (rent × 12 / 365) × number of days occupied.

• Example: $1,500 monthly rent × 12 months: $18,000 / 365 days = $49.32 daily rent, multiply the daily rent by 12 days: $49.32 × 12 days = $591.84.

Number of days in the current month

Divide the monthly rental amount by the exact number of days in the month. This option yields different daily rates based on the number of days in that particular month. 

• Formula: (rent/days in that month) × number of days occupied.

• Example: Divide the monthly rent of $1,500 by 31 days in July: $1,500 / 31 = $48.39 daily rental rate, multiply the daily rent by 12 days: $48.39 × 12 days = $580.68 prorated rent.

Number of days in an average month

There are 30.42 days in the average month. From there, you can calculate the daily rate.  

• Formula: (rent / 30.42) × number of days occupied.

• Example: $1200 monthly rent divided by 30.42 = $39.45 per day.

The number of days in a Banker's Month

Divide the monthly rent by 30 as a banker's month assumes that every month in the year has 30 days, regardless of how many days are in that month.

• Formula: (rent / 30) × number of days occupied.

• Example: $1200 monthly rent divided by 30 = $40 per day.

Conclusion

There are several ways to prorate the rent, and each method yields different results. Perforated rent isn't as complicated as it sounds. Practice makes it easier.

It's always a good idea to specify in the lease agreement how the prorated rent is calculated to avoid misunderstandings between the landlord and the tenant later. This will always protect you from any difficulties, whether you are a landlord or a tenant.