If you've invested in a rental property in San Diego, you've made a great decision! The city has a sustainable population and a high median wage, making it perfect to run a rental business.
However, there's one challenge that you may not have thought about. What happens if a tenant moves into your property in the middle of the month? What happens if they leave in the middle of the month?
You'd be a rather unpopular landlord if you charged them the full rate. Luckily, you can always charge them a discounted rate.
Here's how to calculate prorated rent.
How to Calculate Prorated Rent by Month
The first option is to calculate your prorated rent using the monthly method. You must calculate the daily rate based on the days of the month the tenant arrives or leaves.
For example, let's assume your tenant will arrive in March. March has 31 days. Let's suppose you charge $2,000 as the monthly rental fee. You'll first have to calculate the daily rate as follows:
$2,000 divided by 31 days = $64.52 (approximately)
You'll then calculate the daily rate by the number of days the tenant actually spends in the given month. Let's assume the tenant arrives on March 20. They'll spend a total of 11 days (March 20 to March 31) in the month.
You'll calculate the daily rate based on the number of days spent:
$64.52 multiplied by 11 days = $709.72. This is the amount you'll charge your tenant.
How to Calculate Prorated Rent by Year
The second option is to charge using the yearly rate. Your first step is to calculate the monthly rent by 12 (months in the year). Let's continue with the previous example of $2,000 as the rental fee.
$2,000 multiplied by 12 months = $24,000
Next, you'll divide this amount by the number of days in that year, either 365 or 366. Here's an example:
$24,000 divided by 365 days = $65.75 (approximately)
This is your daily rate. Once again, you'll multiply this number with the actual number of days your tenant spends. Continuing with the example from the previous section, the tenant stayed for 11 days.
The formula is as follows:
$65.75 multiplied by 11 days = $723.25. This is the amount you'll charge the tenant for prorated rent. As you can see, this amount is greater than when you charge via the monthly rate. It's up to you to charge whichever rate you prefer.
Keep in mind that tenants are often worried that their rent will increase. You can charge as you wish, but you can encourage them to extend their lease if you charge the lower rate.
Now You Can Charge Prorated Rent
You now know how to calculate prorated rent for your San Diego rental property.
You can decide whether to charge the monthly or yearly rate. You can consider charging a lower rate to keep your tenants happy. Don't forget to hire a property manager to assist with rent collection and other tasks.
With close to 60 years of experience behind us, Penny Realty, Inc. is the perfect choice for landlords in San Diego. Let's chat about how we can help you.
