Vacancy rate is an effective ratio for landlords. It tells you how many units are vacant and for how long. Keeping a close eye on it helps you fill units faster and collect more rent.
Property managers watch this ratio closely when managing properties. You should, too, if you manage your own rental properties.
If your vacancy rate is too high, look for ways to reduce it. One option is to let tenants move into the units throughout the month instead of waiting until the first.
Of course, you'll need to learn how to calculate prorated rent if you do this. Here is an explanation to help you understand the basics of prorated rent.
Definition of Prorated Rent
Prorated rent is a partial month's rent. It consists of charging a new tenant for the days they live in the unit the first month if they move in on a day other than the first.
Most property management companies offer prorated rent when applicable. However, you only need to calculate it with some tenants. You will not need it if tenants move into a rental property on the first.
Reasons to Use It
Prorating rent offers several benefits. The primary one is it boosts your rental income.
Consider this example. Someone moves out of an apartment on the first, and you spend one week preparing the unit. Therefore, the unit is ready on the 7th.
If you find someone willing to move in on the 7th or 8th, you can charge them a partial month's rent. If you choose to wait until the 1st, you lose rental income from the 7th to the 1st.
Prorating rent reduces the vacancy rates and increases your rental income cash flow. Offering prorated rent is one way to boost your income. Of course, finding great tenants also helps.
How to Calculate It
You can calculate prorated one in two ways. First, use a rent calculator to determine how much to charge for the first month. Secondly, calculate it yourself.
The primary information you need is the daily rate for the unit. For example, a $900-month apartment has a $30 daily rate for a 30-day month.
Next, determine how many days the tenant will live in the unit. If there are 30 days in the month, and they move in on the 7th, they'll be there 23 days.
Multiply 23 days times $30 to determine how much to charge for the month. The answer is $690. They'll pay you this amount when moving in and the full amount at the beginning of every month afterward.
You can also hire a property manager to calculate it for you. Property managers can handle every task, and hiring one is beneficial for many reasons.
Ways Property Managers Can Help
Your business will make more money if you focus on keeping your units occupied. Prorating rent is an effective tool to achieve this goal.
Managing rental properties is a demanding job. Fortunately, you can hire property managers if you need help.
Chicago Style is a full-service property management firm in the Chicagoland Area. We aim to help property owners manage their properties and reach their financial goals.
Get in touch with us if you'd like to learn more about our services.
