Imagine all your rents came in on the same day! This would mean only processing rents 1 day a month rather than 30!
This dream can become a reality if you pro rata the first months rent for your tenants.
This guide will show you the benefits, how to start, and how to implement pro-rata rental payments to increase efficiency of rent processing 10 fold.
Pro-rata rent is rent that is calculated proportionally. The most common occurance of pro rata rents is in the situation of a tenant starting a new tenancy. The tenant might move in on the 28th of a month but the agents want all rents due on the 1st of every month, the tenant will then be asked to pay the 2/3 days rent inbetween.
In short to streamline this process and save considerable time.
If you are processing rents everyday then you are checking the bank everyday, recording the rents everyday, generating landlords statements everyday, paying landlords everyday and possibly paying contactors everyday.
If the majority of the rents came in on the same day, it would mean doing all of these in bulk which will inevitably save time.
Communication is key
A good place to start is to do this for all new tenancies as this is easier to implement. You could give your tenant the option to pay their rent on the 1st or 15th of each month. Alongside this, you should communicate with the landlord (as they are your client) so they are fully aware of when they will expect their payment each month.
It can be a little harder to move these dates for existing tenancies as landlords may have set dates for outgoings (e.g mortgage repayments). If after a discussion with your landlords they are happy to do so, communicate what you are looking to implement clearly to your tenants.
Calculation (per day method)
The next steps is to calculate the pro rata amount, check out the calculation and an example here.
To put it simply you firstly work out the daily rent amount. Then you multiple this by the number of days before the next payment (e.g 1st or 15th).
You can then decide to charge a new tenant:
A months rent + the pro rata amount
Just the pro rata amount
This generally depends on how many days are due.
If you are managing a lot of properties I would strongly recommend looking at the bulk payment file facility of your bank. These allow you to pay all landlords and contractors with one file rather than paying them individually.
Lets say you are paying 25 landlords in one day.
If you have to log in to internet banking, select the payee, identify the amount to pay, type in the amount and pay that could take 3mins a landlord.
So it would take over an hour to just do this task, if you used a bulk file you could make all 25 (or 100,200) payments in 3 mins. This is 25 times quicker.
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