Do you make enough money to rent this place? It’s a question any landlord will ask you, and it’s one of the things you must prove before being able to sign a lease on an apartment or house. Landlords want to be sure that you have the financial means to consistently pay your rent on time and in full. So all applicants need to show proof of income – the amount of money they earn or receive from other sources.
“Landlords are careful as to who they approve because it could take six months to a year to evict someone who stops paying,” says Michael Chadwick, licensed real estate salesperson at Citi Habitats, a real estate brokerage firm in New York.
While a standard pay stub is perhaps the most common method used to verify income, it’s not the only way. Here are options for showing proof:
1. Employment verification letter
For most landlords, an employment verification letter is a viable option to prove how much money you make.
“The best method to show income other than pay stubs is a letter from your company’s HR department on the company’s official letterhead stating the nature of the business, length of employment, salary, and opportunity for bonus,” says Jessica Chen, licensed real estate salesperson at Citi Habitats in New York.
Even if you have pay stubs, an employment verification letter can help verify income that isn’t reflected on those stubs, like tips received by service industry workers.
“We’ve had landlords accept letters from restaurant managers that can attest to the typical number of hours worked weekly and your average take-home amount, including tips,” says Mike Tiburtini, a broker at Spaces Real Estate, a Chicago-based real estate brokerage specializing in residential leasing.
Tiburtini also says the letter is typically followed up with a phone call.
“If you go this route, it’s always good to let your manager know to watch for a call so it doesn’t delay the process of getting your application approved,” he says.
2. Signed offer letter
If you’ve been offered a new job, providing documentation of your new employment can also serve as proof of income.
“Renters can provide a signed offer letter showing their salary if they haven’t started a new job yet,” says Tiburtini. “This is becoming increasingly common for renters who have just graduated from undergraduate or graduate school.”
3. W-2s, 1099s, and tax returns
In lieu of showing your pay stubs, a W-2 Wage and Tax Statement can also be used to verify income. Some people—like freelancers, contract workers, and entrepreneurs—receive a 1099-MISC form. A 1099 is also issued for interest and dividends, and government payments. These documents, with or without your tax returns, can be sufficient to prove income, depending on the landlord.
4. Official statement/letter from a CPA or trust manager
“I come across a lot of people who are freelancers and receive paychecks from many sources,” says Eva Nowakowski, licensed real estate salesperson at Citi Habitats in New York. “While scans of a few recent checks are helpful, I often have them provide an official statement regarding their annual income from their CPA or financial manager. If the tenant is self-employed, then a common method is to provide a CPA letter stating their business income last year and projected income this year.”
Chen adds that when a tenant is the beneficiary of a trust, the trust manager can send a letter outlining the payment guidelines, which can also serve as proof of income.
5. Bank statements
“When renters don’t have pay stubs, if they make consistent deposits over time, we can print off the bank statements to show they are making money to pay for the apartment,” says Zach Daniels, a leasing consultant at Spaces Real Estate. “Or if they have a large sum of money saved up, we can use that as proof they have money saved to pay for the apartment.”
6. College financial aid documents
College students who receive financial aid to pay for their living costs can use this information to confirm their financial history.
“Most likely, a college student wouldn’t qualify for the apartment just with pay stubs from a part-time job,” says Daniels. “In these cases, they can turn in loan, scholarship, and/or grant documents that show they will be getting money to pay for their apartment.”
It’s also possible to get the help of a guarantor to bolster your annual income. A guarantor essentially promises to pay your lease if, for any reason, you are unable to. A guarantor can be a relative or close friend, but must make a certain amount of money per year. Landlords will typically require a guarantor to make at least 40 times the monthly rent, although Chadwick says some landlords require 80 times the monthly amount.