Prorate first month or change due date

[Jon S.]

Do you prefer to prorate the 1st mo rent or change the due date? I’ve always pro-rated the 1st month but now that I have property mgmt software it can easily keep track of multiple due dates. I have a tenant moving in on the 5th and am thinking about just making the 5th of the month their due date for rent instead of the 1st. Any reason I shouldn’t? Thoughts?

[Ryan Murdock]

I like to keep all of my due dates the same (the 1st). Regardless of software I think you'll find it easier as you scale if everyone is due at the same time.  For example, I run a delinquency report on the same date every month and whoever is late gets their pay or quit notices all in the same run. That exercise would be a lot more cumbersome if due dates were all different. 

If I have a tenant move in mid month I always collect a full first month's rent at move in (along with the security deposit). I will then "prorate" the 2nd month. By the third month they owe the full amount again. I generally end all leases on the last day of a given month as well.

For example:

Rent is $1000/mo.

Tenant moves in Sept 15. I require $1000 rent (and $1000 sec dep) at move in. $500 of that $1000 rent payment goes towards Sept 15-30 rent and the other $500 gets credited towards the first half of Oct rent. On Oct 1 they owe another $500 which covers the second half of October. 

On November 1st they owe a full $1000 and will on the first of every month thereafter. 

I spell all of this out in the lease:

Funds Collected on or Before Lease Signing:

The following funds are due on or before the signing of this lease agreement unless otherwise agreed to in writing:

First Month’s Rent: $1000

Security Deposit: $1000

Pet Fee: $NA

Last Month’s Rent: $NA

Total Due: $2000

Second Month’s Rent (Pro-Rated Amount): $500  (Due Oct 1)     

Yes, this does require a little more thought upfront than just having the rent due on whatever calendar day they move in but once you do it a few times it's not bad and definitely worth the effort to keep everyone on the same schedule.