Have you invested in a rental property in Huntsville, Alabama? The state has a sustainable population growth of 0.26%. One can expect to have a sustainable influx of residents throughout the decade.
As such, you can expect to have tenants knocking on your door every now and then. However, what happens if your tenants arrive in the middle of the month? How do you calculate the rent?
You can hire property managers to calculate prorated rent for you. However, it's important that you understand how this works.
Here's what you must know:
Calculating Prorated Rent by Year
Landlords in Alabama are permitted by law to charge prorated rent either yearly or monthly. With the yearly method, you'll have to charge your daily rental fee based on the number of days in that given year.
Here's the scenario: Bill wants to rent your property in 2024. This is a leap year, and the daily rate will be multiplied by 366 days.
First, you must calculate the total rent you'll collect within a one-year period. Let's suppose you wish to charge $3,000 per month as rent. For a one-year period, the total you'll collect is $36,000.
You must divide this yearly amount by the number of days in the year. For this scenario, the formula is:
$36,000 divided by 366 = $98.36. This amount of the daily rate you'll charge Bill. Let's suppose Bill moves in on the 20th of September. He'll stay for a total of 10 days in that month (30 days in September - 20th = 10 days).
You'll multiply $98.36 by ten days. The result is $983.60, and this is how much you'd charge Bill for prorated rent when he moves in.
Calculating Prorated Rent by Month
The next option is to calculate the daily rate by the number of days of the month. Once again, let's presume Bill is moving to your property in September.
You'll divide $3,000 by 30 days. This amounts to $100. This is the daily rate you'll charge Bill. Once again, if he moves in on the 20th, then he's staying for 10 days in that month.
$100 multiplied by ten days = $1,000. This is what you'll charge him as prorated rent. You can decide whether you wish to charge by the yearly or monthly rate. In this scenario, the monthly rate brings you a higher rental income.
However, keep in mind that some tenants might feel that you're trying to pressure them to pay more. The yearly rate is appropriate if you want them to commit to a one-year lease. Consider the monthly rate for shorter lease periods.
While you can also charge the full rental amount, offering prorated rent will be welcomed by your tenants. They'll be more likely to renew their leases as well.
Hire Property Managers Today
You now understand how to calculate prorated rent and can decide which method to use when charging your tenants. Of course, rather than going through the hassle, you can hire property managers to help you.
PMI North Alabama is Huntsville's premier property management company. We have received several positive testimonials from our clients and look forward to helping you as well!
