Calculation Methodology & Formulas

Method 1: Actual Days in Month (Primary Standard)

This is one approach used to calculate prorated rent. The method specified in your lease agreement should control. Because each calendar month has an exact known length, dividing by the actual number of days treats each month as an independent financial period. Days of tenancy include both the start and end dates inclusive.

Method 2: 30-Day Method (30/360)

The 30-day method (based on the 30/360 accounting convention) assumes every month has exactly 30 days. While convenient for long-term bookkeeping, it can produce slight variances in February (where 28 days of rent would not equal a full month) and 31-day months.

Method 3: 365-Day Annual Formula

Preferred by large corporate REITs (Real Estate Investment Trusts) and institutional property management software (such as Yardi and RealPage). This method calculates the annual lease liability first and divides it across 365 days (or 366 in leap years), providing a completely uniform daily rate regardless of the month.

Method 4: 360-Day Commercial Standard

Standard in commercial triple-net (NNN) leases, retail storefronts, and industrial warehouse tenancies.