Showing proof of income is a vital part of the tenant screening process for any rental agreement. Validation can be supplied in various formats to the property manager, which is now easier than ever thanks to cloud communication platforms.
Read on to learn about the most common ways proof of income can be provided and how these documents can be shared.
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It is crucial for apartment complexes to request and verify proof of income when renting an apartment. This is a preliminary step that can help avoid situations where tenants become unreliable or face financial difficulties due to inadequate measures taken initially. However, tenants also should know what information absolutely has to be provided.
The 50%-30%-20% rule is commonly used by banks and individuals as a guide to maintaining financial security. The 50% signifies that half your net income will likely be spent on essential living expenses, like your rent/mortgage, bills, and food.
It’s generally accepted that this should leave you with enough money set aside to satisfy your wants (30%), as well as save or pay off any outstanding debt (20%). However, the number of people paying more for their housing is on the rise.
By paying more, renters risk financial difficulty and its associated problems i.e. increased debt, missed payments, and even bankruptcy. It’s therefore important for everyone that proof of earnings is supplied to mitigate any risk to the tenant or landlord. Also, late payment presentment can lead to payment disputes and other issues.
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Pay stubs provide a record of your salary and are the most common way to prove income. These will usually be requested for a number of months leading up to the present date. They can easily be obtained from an employer, however small, through payroll software for small businesses.
Important considerations to bear in mind are that:
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If you don’t possess run-of-the-mill pay stubs to evidence your earnings, don’t worry. This information can still be provided to your property manager on request.
If you’re unsure what to do, many organizations utilize VoIP numbers which they can be contacted on if you need to ask for help or guidance.
Why would someone use a VoIP number? To make it easier and more efficient to speak to their clients, of course, so don’t be afraid to bother them! They’ll be more than happy to answer any questions you have and clear up your confusion.
They might suggest you supply one of the following documents instead.
Form 1099 is one of the best options for those who are self-employed and don’t receive a pay stub, as well as those with multiple revenue streams. This form organizes information into an official, recognized document that can be easily shared.
Form 1099 is available online through the IRS. It declares various types of income someone has received beyond employment, such as bonuses or incentive payments, as well as income from rents, interest, or dividends.
Alternatively, you might be able to use your tax return. Tax returns can be applied for through official government websites. They provide information about your income based on the taxes you’ve paid.
This can be particularly useful if you have several jobs or work as a freelancer, meaning you can’t provide traditional pay stubs.
If you choose to use this method, you may be asked to prepare evidence for a longer period, usually a year, as this better validates your ability to pay.
Even if you’ve recently lost your job, you can use any cash agreement made at the termination of your contract to prove you have the necessary funds to rent the property.
The lump sum you received may be enough to cover several months of rent, even if it’s insufficient for a longer-term rental agreement.
A signed letter from your employer can also be used to confirm your salary. If you’re concerned about what information this needs to include, templates can be found online.
The information that’s necessary is actually rather basic:
Not only do bank statements substantiate proof of income, but they show where funds originated, allowing the property manager to corroborate this with your employment verification.
The rule of thumb is that around three months of statements are required. These can easily be shared by Airtable export to Google Sheets.
If you use this method, remember to only include your income – you don’t need to disclose how much you’re spending on clothes, for example.
You may have received compensation for an injury sustained at work—submitting a letter to your future landlord or property manager from your employer or insurance company should suffice to prove this. Perhaps a court provided you with official documents highlighting your compensation. You can use these too.
The same is true for any social security for long-term illnesses or disabilities. These are considered permanent parts of your total income and can help validate your ability to pay.
This includes, as above, payments for compensation and also things like child support or alimony. If you don’t already have a record of this, evidence can be requested from the Department of Justice.
These can be proved by supplying last year’s tax return and confirming your pension income. As this is subject to change, you may be asked to provide annual updates on your pension package to guarantee you can continue to pay.
The reason proof of income is requested is to ensure that no financial problems befall the tenant and that they’ll be living within their means. Familiarizing yourself with important rental laws is also a good idea when you’re on the hunt for a new home.
Sometimes, people worry that their particular form of employment may prevent them from obtaining a tenancy agreement, as they can’t provide traditional pay stubs. As you can see, however, there are many other methods available to substantiate your income.
These include providing employer verification, proof of non-employment income, and income received from benefits, injuries, or pensions.
Maxine Parks is a creative writer and marketing strategist that has a passion for helping people understand complex topics online so that they can implement them in their real life. She joined the RentReporters team in 2022 and is excited to help empower people to take control of their financial future.
