Denver's rental market remains soft as vacancy rates continue to rise after 2020. So if you're a Denver landlord or property manager, you might need to rethink your property management strategies to keep your properties profitable.
One way to do this is by allowing tenants to occupy your rental units for a partial month at the start or end of their leases. This involves calculating prorated rent for at least one month of their stay.
These simple calculations can make all the difference for your tenant relationships, so it's worth knowing how to do them. Read on for prorated rent calculation tips as approved by our team of property managers.
Why Would You Calculate Prorated Rent?
For those who own or manage a few apartments, it's simple enough to adjust your tenant's rent due date to coincide with any day other than the first of the month. Yet, when you own multiple rental units, this can cause complications with your bookkeeping procedures.
In these cases, it's best to calculate prorated rent to accommodate your tenants. What about those times when a tenant wants to vacate your property earlier than the end of the agreed time frame?
Under Colorado law, you aren't obligated to charge them for a partial month's rent unless:
- You find a new tenant to take up the extra days
- The tenant is called up for active military duty
- The unit has become uninhabitable
However, allowing your tenants to pay part of a month's rent can serve as a thank you to them for being good tenants.
How to Calculate Tenant Rent Adjustments
Prorated rent calculation for managers depends on the type of lease that's in place. In both cases, you must calculate the cost of one day's rent to determine how much the tenant owes.
Annual Leases
Calculating prorated rent for an annual rent is simple. Divide twelve months' worth of rent by 365 to get a daily rate for your rental unit.
You can also use this calculation for month-to-month leases if preferred.
Month-to-Month Leases
You can calculate prorated rent for a month-to-month lease by dividing the monthly rent by the number of days in the first month to get a daily rate. If the tenant wants to leave early, use this calculation:
- Calculate the number of days the tenant has been in residence
- Divide this by the number of months they've occupied the unit
- This will give you an average daily rate for past months
In both cases, you simply multiply the daily rate by the number of days they will occupy the unit in their first or last month. This calculation will yield a prorated amount for that month.
Professional Property Managers Help You Do the Math
Calculating prorated rent for tenants takes a little extra effort, but it can be worthwhile in a soft rental market. The calculations are relatively simple and can help reduce vacancies and increase tenant satisfaction.
PMI Aspire employs a team of experienced and highly skilled property managers to help you navigate the complexities of owning a Denver investment property. We can help you answer all your Denver property management questions, including how to calculate prorated rent in your circumstances.
Discover our formula for stress-free, profitable property management today.
