Most of the time, the only thing standing between you and that great house you’ve been eyeing for a while is proof of income. In all fairness, there are other things that may influence a landlord’s decision, but if you can prove, without a shadow of a doubt, that you make enough money to pay rent and live comfortably, you’re already on the right path.
But income sources nowadays are varied and don’t fit the standard “I’m employed by X company, so I’m good” paradigm. This is why today, we’ll talk about the different ways you can prove you’re good to pay your rent on time depending on your employment status.
Why Do Landlords Request Proof of Income?
If you’re new to renting or have been out of the game for a while, you may wonder why landlords are so obsessed with how much money you make. You have all the qualities of a good tenant, so why do you have to prove your income?
This quick check is a way for landlords to ensure you can handle the rent. It’s not them being nosy (well, some of them are); it’s more about making sure that the rent won’t gobble up your paycheck, leaving you scrambling.
Think of it as protection for both parties. For landlords, it’s about reducing the risk of late payments and evictions (because nobody wants to deal with that mess). For renters, it’s about finding a spot that doesn’t stretch your budget thinner than a piece of cheap toilet paper.
1. W-2 Employee
As a W-2 employee, you are officially employed by a US company or organization, and you have to fill out the W-2 tax form to report your income. If you are employed, you can easily prove your income using pay stubs or paychecks.
Most employees get pay stubs once or twice a month, showing exactly what they’ve earned and the bite taxes, health insurance, and Social Security have taken out. To put your best foot forward for your landlord, gather the pay stubs from the last three to six months. This shows your recent income and that you’re consistently earning.
Recreate Lost Pay Stubs
So, what if you’re a bit messy and forgot to save your paychecks? How can you still prove your income to your landlord?
Luckily, nowadays, you can prepare your pay stubs with FormPros and have them in tip-top shape for inspection. Also, if life happens and some of your stubs get lost, you can easily recreate them using the same tool.
Additionally, you can ask for a Letter of Employment from your company to disperse any doubts your landlord may have.
2. Self Employed, Freelancer, and Similar
Being self-employed or working as a contractor no longer surprises anyone, so you shouldn’t have problems convincing your landlord about your income. Still, you have to show some official documents, and tax returns are your best friend in this case.
Tax returns give a full-on snapshot of what you earned and what taxes you’ve coughed up over the past year. This allows anyone checking these documents to gauge your income stability.
If you’re working with a CPA, you can also ask them to compile a letter that provides the landlord with the necessary details. Whether you choose tax returns or a letter from your CPA, both these documents are like a gold stamp of approval on your earnings.
If you’re an entrepreneur or a solopreneur, you can also use a Profit & Loss (P&L) Statement to prove your earnings. This document is essentially your business’s report card, listing all the cash that came in (revenue) versus what went out (expenses). It’s a clear indicator of whether you’re swimming in cash or just staying afloat, which landlords love to know ahead of time.
3. Retired or On Disability
According to recent surveys, more and more pensioners rent these days. Also, based on official data, the number of pensioners who rent is expected to double over the following 20 years. If you’re retired but rent, you can show the landlord your Proof of Retirement. Based on this document, they will be able to assess your overall financial situation.
If you’re not retired but living on disability benefits, you can use your Benefits Statements as proof of income. It may not be much, but since it’s a government-issued document, there isn’t any reason to doubt it.
Both the Proof of retirement and the Benefits Statement break down exactly what you’re getting paid monthly, indicating your ability to manage rent payments.
Lastly, there’s more in the toolkit to show you have a steady cash flow. Proof of retirement or disability income can come from various sources like pension distributions or disability insurance payments. Documents here could include award letters, bank statements showing direct deposits, or annual statements from your pension plan.
Wrap Up
As you can see, whether you’re a standard, upright employee, a solopreneur, or a freelancer, there are ways to prove your income and financial stability. The same is true if you’re retired and renting or if you’re living on disability checks.
If your situation is unusual (and we didn’t mention it here), it’s best to talk with a finance specialist who can provide the necessary guidance and help you get the documents you need. If you want to make a good impression on your future landlord, having your proof of income backed by a financial expert is one of the best ways.
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