Vacancies not destroying investment? Partial Month's Rent?

Question

Hey everyone,

Big Noob here. 21 years old and aggressively saving for my first down payment. Just beginning the process of acquiring resources and learning about rental properties. One thing that stuck out to me was vacancies. Calculating the monthly expenses for a property, even Captial Expenditures, does seem daunting but at least very straightforward. Vacancies however seem like they could siphon away your yearly cash flow so easily. I'm imagining that my first property's monthly rent is $1200, with a mortgage of $550 and total monthly expense cost of $1000. I haven't come across anything so far on "Partial Month's Rent" for lack of a better term. Basically if a tenant moved in on the 12th, do they still pay for the other 18 days of that month and how so? Is it all stated directly in the lease up front? Would it be approximately 60% (18 days / 30 days) of the rent? So would I be able to expect approximately $720 that month?

Appreciate it,

Eric

Kyle J. · Answer

Typically you always want to collect a full month's rent initially, no matter when someone moves in.  If there was a partial month to collect for, you could collect that their second month.  But you generally don't want to let someone move in by paying a partial month.

I always collect a full first month's rent + security deposit initially, and then pro-rate the second month's rent (if necessary) based on when they moved in during the first month.  Here's a few examples using your projected $1,200/mo rent to help illustrate:

- Example 1 = Tenant moves in on June 1st.  They pay $1,200 for June, and $1,200 for July.  Super simple.

- Example 2 = Tenant moves in on June 5th.  They pay $1,200 for June (remember, always collect full month's rent upon move in), and they will pay $1,000 for July.  (Here's how I figured July's rent: Rent in June was $1,200 which is $40 per day.  They were there 25 days of the month, which equals $1,000.  So this is what they're going to need to pay in their second subsequent month, July.)

- Example 3 = Tenant moves in June 12th.  They pay $1,200 for June, and $720 for July (for the same reasons/calculations as stated above).

- Example 4 = Tenant moves in June 25th.  Now, as it gets closer to the end of the month, and the payment for the second subsequent month would just get smaller and smaller, I'll typically just collect it along with the initial first month.  But that's just my preference.  So, in this example, I would collect June and July together ($1,440) and then the tenant wouldn't owe a rent payment again until August 1st (at which time they would owe August rent in full).

Hopefully that helps clarify things a little for you.

John S. · Answer

Yes, typically it would be indicated in the lease and they would pay you prorated rent for the month.