There's nothing like having a constant stream of income flowing into your bank account each month. But how reliable is your source? If you're like many other Americans, you have discovered the benefits of investing in real estate and being your own landlord.
The question is, how can you make sure that the people you accept as tenants won't leave you with more complications than cash? Showing proof of income is an essential step in getting approval to rent an apartment. Here are five ways a renter can show proof of income. Let's get started!
1. Proof of Income Documents Include the W-2 or 1099
W-2s, or income statements, are standard documents used by the federal government to verify workers' incomes for tax purposes. The benefit of using a W-2 to verify a potential renter's income is that it comes from an employer, so it is completely reliable.
The downside? The majority of rents do not have W-2s on hand. Plus, it doesn't offer the most up-to-date look at a renter's income since promotions and raises aren't reflected in it.
The 1099 form is what you'll need instead if your prospective renter is self-employed. The great thing about 1099s is that these documents are easy to verify. On the flip side, self-employed people could easily have several 1099s, and it's impossible to confirm if their incomes will stay steady all year long.
2. Tax Return
This is one of the best documents to use to verify income, as it is the most thorough. A prospective tenant may not recall of his or her income sources, but the tax return will reveal them all. The disadvantage of relying on a tax return is that locating this tenant may be challenging for the aspiring tenant. Plus, it might not be completely current.
3. Pay Stub
This is one of the most convenient documents to use for income verification purposes. After all, potential tenants receive these every time payday rolls around. That means they are both current and easy to find. The challenge with pay stubs, though, is that you'll have to verify these documents with your prospective tenants' employers.
4. Employer Letter
Letters from employers are relatively simple for interested tenants to acquire. And if an employer provides a reference to a possible renter's work ethic, that's icing on the cake.
Of course, the con of an employment letter is that an aspiring renter could easily forge it. If you receive an employment letter, it may be in your best interest to contact the person who supposedly drafted it and verify that he or she actually produced it.
5. Bank Statement
Finally, bank statements can be handy for proving an aspiring tenant's income. After all, they are both tax adjusted and current. The challenge you might face with these documents, however, is that they are intrusive for tenants.
How We Can Help
We offer high-quality software for generating pay stubs for employees and keeping track of your finances as an independent contractor. Contact us to find out more about how renters can provide proof of income and how you can protect your finances for years to come.
You can also get started by creating your stub now!