Rent is higher than ever. Half the country spends over 30% of its income just on rental housing. In Tennessee, the median rent is an eye-watering $1,047.
For property managers, this can put you in quite a pickle if your tenant has a month-by-month contract. Charge too little, and you don't make an ROI, but charge too much, and tenants are unhappy. Especially since you're not charging a fixed amount, but rather prorated rent.
What is prorated rent and how do you calculate it? In this rent calculation guide, we will teach you everything you need to know for your Nashville, TN property.
What Is Prorated Rent?
When you're making your Nashville rent calculation, you generally have two types of rent payments. One, the typical yearly lease where the tenant pays the same amount every month. Two, a day-by-day rental where the tenant only pays for the total days they were in the apartment.
Situations with Prorated Rent
Prorated rent is useful in a handful of situations. Either you have a tenant who doesn't want to commit to a more common year-long lease. Or, the tenant doesn't live 100% of the time on your property.
How to Calculate Prorated Rent
The math here is very simple. Start by multiplying your monthly rent by the full 12 months of the year. Then, divide that total by 365, the number of days in the year.
This will give you a daily rental amount that you can use for the following prorated rent steps. You can also find daily rent by dividing the monthly rent by the days of a specific month.
Keep Track of the Tenant's Occupancy
Next, you keep track of how many days per month a tenant actually lives in the rental. You will have to use the honor system; they'll report to you how often they're there.
Otherwise, keep track in an ethical way. Don't go peeking through their blinds!
Multiply with Daily Rent
At the end of the month, add up all the days that the tenant was occupying your property. Multiply this number with the daily rent we established earlier. This is how much rent they owe for that month.
Benefits of Prorated Rent
The biggest benefit of prorated rent is that the property can be available for multiple tenants. It's almost like a short-term rental, except with a mix of short-term and long-term tenants.
Further, rent is also relatively high. The daily rental rate means you get a fair shake even if someone only stays for a couple of days.
Downsides of Prorated Rent
Of course, prorated rent does not come without its disadvantages. The biggest is that you aren't getting a secure stream of income. Unlike a one-year lease, your ROI will depend heavily on how often a tenant occupies the place.
Find Help from Experienced Property Managers
With this property management advice, you now know how to calculate prorated rent. Simply calculate the daily rate, then multiply it by days of occupancy. You get the benefits of both a short-term and long-term rental, even if occupancy may be spotty.
Green Tree Property Management has property managers experienced with handling prorated rent situations. We make sure you get accurate occupancy reporting and on-time payments. Visit our website to determine how much your property could earn.
