Who Prorates Rent Using a Bankers Month

Question

There's conflicting information about the "Correct" way to prorate rent.

At least some professional property managers state the correct way to prorate rent is based on a 30 day bankers month, regardless of how many actual days there are in a month.

Doing the math, this arrangement generally works to the favor of the property owner/landlord, albeit slightly.

I have also been told that certain states legally require rents to be prorated based on a bankers month.

Bill Gulley · Answer

No, 360. Jon's vote above was for the 360, not from my missing your "moved in" date, LOL!

I believe if you check with HUD you'll find that 360 is used, government uses 360 in leasing. Your accounting will be standardized and consistent without counting your knuckles.

Biggest issue is being consistent, in real estate pro-rations of odd days charges are done on a 360 basis. If you bought a place with rents assigned, that's what you'd get your rent assignments based on for both parties, time consumed and time paid in advance. :)

Bill Gulley · Answer

Neither way, they stayed for five days at $50 per day, $250, you don't charge them for the days they didn't stay, just for the days they held over. :)

Use 360, it's in your favor, your accounting will be easier and correct as well.

Might be $12 difference on one unit, what if you have 500 units to adjust over the year, not chump change any more....  :)

Jon Klaus · Answer

I use 30 day months for the purpose of proration at the direction of my CPA.

Shawn M. · Answer

Bill Gulley

Don't you mean 365 days? also the tenants moved IN on the 5th

Shawn M. · Answer

@Jon Klaus

If you use the 30 day bankers month, do you then subtract the days not used or add up the days used in the month for example,

Aug = 31 days, Rent = $1500

Per 30 day bankers month, daily rate = $50

If my tenant moves in on the 5th of the month do I Subtract $200 ( $50 * 4 days) from the rent and come up with $1300

OR

Do I add up the days rented in Aug, which is 27 (27 * $50) and charge them $1350

Ryan B. · Answer

I use however many days are in the actual month.

Jeff S. · Answer

Have heard 360 day year too, same thing. Just personally feel right using a 365 day year. Rent x 12/365.

Kyle Meyers · Answer

I use bankers month. It is standard practice here and not addressed in the laws. I also state this method in my lease so the tenant is aware and agrees to its use.

Who Prorates Rent Using a Bankers Month

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