Merced, CA, is one of the few rising cities in the state, with a population growth of almost 12% since 2020.
As a result, landlords won't struggle with finding new tenants to move into their place. However, there is one unique problem that might arise. What happens if your tenant moves in after the first day of the month?
You can charge prorated rent, which is a reduced rental fee for when your tenants don't stay for a full month. Property managers can help with this, but you should know how it works.
Here's how to calculate prorated rent:
Pro-Rated Rent Formula by Month
The first formula is the monthly rent calculations. You'll calculate the daily rental fee based on the number of days in that month.
Let's suppose you have a tenant, Rishi, who wants to move into your property on July 10th. July has 31 days and he'll stay for 21 days. You'll only charge him for those 21 days that he's staying.
Let's presume your monthly rental fee is $5,000. The daily rate is calculated as follows:
$5,000 divided by 31 days = $161.29.
Next, you'll multiply this daily rate by the number of days that Rishi will stay in July.
$161.29 multiplied by 21 days = $3,387.09. This is the prorated rental fee that you'll charge Rishi for July.
Pro-Rated Rent Formula by Year
The next option is to calculate the daily rate by the year. This is best if you've signed a one-year lease agreement with your tenant.
First, you must calculate the total rental fee that your tenant will pay over a 12-month period. To continue with the previous example, Rishi pays $5,000 per month. This means that he'll pay a total of $60,000 for a one-year lease ($5,000 multiplied by 12 months).
Next, you'll have to calculate the daily rate based on the number of days in a year. For 2024, you'll divide by 366 rather than 365, since it's a leap year.
$60,000 divided by 366 days = $163.93. This is the daily rate. Next, you'll multiply this daily rate by the 21 days that Rishi will stay in July.
$163.93 multiplied by 21 days = $3,442.53. This is the prorated rent you'll charge for July.
It's up to you whether you wish to charge the monthly or yearly rate. It's always best to charge prorated rent, as your tenants won't find it fair if they have to pay the full amount if they're not staying for a full month. You can also charge prorated rent for their final month in case they leave early.
Property managers understand this rent calculation guide. They can calculate and collect your prorated rent for you. They'll also assist you with understanding your other landlord obligations.
Property Managers Can Help
You now know how to calculate prorated rent for your investment property in Merced. Property managers can calculate the prorated rent for you and collect the money on your behalf.
Chosen Property Management is the best option for Merced-based landlords, new and old. We have over a decade of experience helping landlords by offering a variety of helpful services. We know we can help you as well!
