Whether you are renting out your property for the first time or even if you have some experience with renting, you always want to make sure that you screen every single potential tenant thoroughly. If you are a potential tenant and you are looking to rent out a home or apartment then you will want to make sure that you have all the necessary documentation ready when applying for a lease to make the process of renting as seamless as possible. For landlords, you want your tenant to provide their proof of income so that you can have the peace of mind and security of knowing they will be able to pay their rent on time each and every month. You will also want to ask them important questions in the tenant screening process to make sure they are a good fit to rent out your property unit. This article is going to focus on proof of income and all the different types of income proof that a potential tenant for your home can provide to you as a landlord from the perspective of a potential tenant.
You absolutely do not want to skip over the proof of income step. Some landlords are very relaxed about the proof of income and will simply verbally ask what you do and where you work, while other landlords will want you to provide your proof of income in writing. We think that the latter is the best option if you are a landlord, as getting important information like income in writing is a smart decision. There are different forms of proof of income and we will cover each one so you know what documents are required from your tenant before you accept them as a tenant and if you are looking to rent a home this information will be invaluable.
Before we dive into the types of proof of income it is important to define what exactly proof of income is.
Proof of income is a document or set of documents that someone, like a lender or landlord, requests to verify a potential tenant’s income and determine your ability to pay. Some may ask for some form of a proof of income letter. This letter summarizes and verifies your income and employment.
Proof of Income Letter
This verification will usually come in the form of a letter, written by you, an employer, an accountant, or a social security caseworker. This income verification letter will serve as your official proof of income and needs to contain specific information. This letter should be written in a formal way containing all relevant information regarding income.
An example as to what could be written as the basic information about a tenant’s income could be something like:
For example, you may start this portion of the income letter by saying, “I am employed full-time as a chef and work part time as a self-employed freelance photographer. I have been in this line of work for the past 8 years, and self-employed for the past 2 years, my average monthly salary is $5,000 per month”
Going into extreme detail is not necessary as the landlord will just need to get a good idea of how much you earn on a monthly basis in order to determine if you will be able to pay the rent each month without stretching your finances too much. As a landlord, you may also want to take this information from the verification letter and verify that it is correct.
You also want to make sure that any additional income received other than the main source of employment income is also given. To make sure that this income is able to be maintained or increased over time, a projection can also be given in the proof of income letter taking into account self employment business growth and any raises provided by your primary job. To make sure that the letter is recognized as an official document it needs to also be notarized by an official notary.
Proof of Income When Self-Employed
Having proof of income ready to go when you are self-employed is a little bit more tricky and time consuming compared to if you were working a regular job, as a self employed individual you will have to keep track of all your finances yourself or hire an accountant to do it for you.
Here are some ways in which you can show your proof of income if you are self employed:
- Gather all your yearly tax returns
- Official notarized bank statements indicating your cash flow
- Documents from an accountant or online financial accounting software
- Statements showing your businesses profit and loss
Let’s go over these steps so you have a clear picture of what each one involves and how you can easily get these documents ready and verified.
Gathering all your yearly tax returns
Whenever you get a new tax return it is very important to file it away for future use like providing proof of income for renting out a new home. If you are not organized when it comes to your tax returns then it is not only going to make the task of keeping track of all your taxes difficult, but in these situations where you need to provide proof of income it can be a major headache and frustrating if you cannot find the documents that you need when you need them.
Getting Your Bank Statements Verified As Proof Of Income
This is probably one of the easiest ways to get an official document of your income. If you have online banking then you can simply log into your profile and download one of your most recent bank statements (typically one within the last three months) and then print this out and then have it notarized for the purpose of making sure that it is an official document.
Getting your bank statement notarized can be a very simple process. All you will be required to do is take the completed financial statements and your identification to a notary. For example, many bank representatives are licensed to perform notary services for customers. Present the documents and your identification to the notary for notarization. You then have an official document that you can include in your rental application which will make the process of getting approved for a home or apartment much less time consuming than some of the other methods that we have discussed.
Documents From Your Accountant Or Online Financial Software
It’s always a good idea to hire an accountant when you are self-employed, but it does come with some additional costs that you may or may not be able to afford. You would simply inform your accountant that you require a proof of income for your new property unit that you are looking to rent out and they will begin the process of getting all the necessary documentation ready for you.
This saves you heaps of time, frustration and headache of having to do it yourself and will also ensure that the information is presented to the landlord correctly and is also 100% accurate. If you do not have the financial means to hire an accountant but have been keeping track of all your finances with online financial software like Quickbooks then you can simply log into your software of choice and print out the documents that you need.
Many online financial softwares will have the ability for you to print out a proof of income, then all you would be required to do is have this document notarized and give it to the landlord.
Business Profits And Loss Statements
Gathering this information can be time consuming and having an accountant do it for you will help you out, but what you would essentially do is put together your businesses total profits and losses in a statement and have it notarized.
Making a copy of these documents and having them verified can serve as a proof of income when it comes to renting a home. You can combine these documents with an official letter written by you stating exactly what your income numbers are each month and each year and then enclosing these documents with your letter.
When it comes to renting and being self employed it is often a little bit harder to get approved for a lease because when you are self employed your income is not as stable and guaranteed as it would be if you were employed by a company. Often if you are employed by a company and self employed part time it can be easier to get approved for a rental lease as the stable employment income can act as a backup if anything happens to your self employment income.
It is super important to keep track of your finances throughout the year if you are self employed as it will be very time consuming and stressful to try and gather all of these documents at the last minute when it comes time to rent out a home. If you are self employed it is always recommended to hire an accountant to help you and keep track of all your finances for you. This will not only save you a lot of time and stress but also ensure that the information and documents that are being submitted are accurate and correct. The last thing you want to happen is to submit false information to your landlord due to a mistake on your part.
There are many online tools that can help you keep track of your finances and one that comes highly recommended is Quickbooks.
This software will help you to input and keep track of all your finances in one place and it comes in at a very affordable monthly price so you can take advantage of it without breaking the bank and you will have peace of mind of knowing that all your financials are up to date in the situation where you need to provide proof of income in order to rent out a property.
Proof of Income From Social Security
If you are living in the United States and need to provide proof of income for renting purposes and you are currently receiving social security then there is a straightforward process that you can follow to get this done quickly and easily. The government makes this easy to do and they have a website set up so that you can get all the documentation you need. The process to do this is as follows:
If you need verification of your income from Social Security, obtaining it is easy and convenient. You can go here and look in the left column under “Top Services,” open the “Services for people currently receiving benefits” section, and select “Request a Proof of Income letter” to get a letter that verifies your Social Security benefit information.
After you have done the above step it can take up to 10 days for you to receive the proof of income letter in the mail. You can also visit your nearest social security office in the instance that you need this income letter sooner. You will then be able to take this proof of income letter and hand it in and you will be able to start the process of applying to rent a home or apartment.
Obtaining this letter is a little bit more time consuming compared to the other options we have discussed, simply because you have to wait for the letter in the mail whereas with the other methods, if you had this information on hand you could get it done much sooner.
We hope that we were able to give you the information that you were looking for with this article, if you have any further questions then always feel free to get in touch with us here and we will be more than happy to assist you