When you rent an apartment, you will likely be required to show proof of income to demonstrate that you have the means to cover the rent each month. Paystubs are the most common way to prove your monthly income, but tax returns, bank statements, and other documents can also be used.
These documents can also be used as proof of income in other contexts, such as when applying for a mortgage or other financing. In this article, we’ll focus on how you can prove you have enough money to rent an apartment.
How Landlords Evaluate Proof of Income
Landlords use your proof of income in collaboration with a credit check and a background check to determine whether you can afford the rental you’re applying for.
In some cases, landlords may specify that applicants must demonstrate income equal to a minimum of three or four times the monthly rent. A common budgeting rule of thumb is to spend at most 30% of your income on rent, which is why landlords look for this number. However, with the cost of living rising throughout the United States, the 30% rule isn’t necessarily realistic anymore, especially in markets like San Francisco or New York City, where rents are notoriously high.
You should never attempt to rent an apartment that you can’t realistically afford, but you may need to go out of your way to prove to a prospective landlord that it is within your budget. If you know the monthly rent exceeds the typical 30% rule, providing proof that you have several months’ worth of rent payments in savings may provide sufficient peace of mind for a landlord to rent to you.
How to Show Proof of Income
The documents you use to prove your income to a prospective landlord will depend on your primary sources of income, how you typically get paid, and how you manage your finances. Ultimately, you should provide the documents that make it most straightforward for your landlord to see that your income is sufficient to cover your rent and expenses.
You can use many different documents to illustrate your monthly income and prove your ability to pay the rent. We’ll discuss them in detail below.
Pay stubs are a common way for prospective landlords to verify how much money you earn each month. However, unless your job is salaried or you work the same number of hours each week, your pay stubs may not provide an accurate overview of your monthly income.
If your earnings tend to fluctuate from one pay period to the next, providing two or three months’ worth of pay stubs will give a potential landlord more insight into your overall income.
1040 Tax Forms
Tax returns can be a helpful way to showcase your overall income. However, since they only reflect the previous year, a prospective landlord may request additional documents to show that you continue earning a sufficient salary to cover your rent.
But since tax returns also include information like your social security number, birth date, and full name, they can help verify your identity.
It’s wise to keep your most recent tax returns on hand so you can use them for rentals and other loan applications. A prospective landlord may wish to see your 1040 tax form, which shows a snapshot of all your income sources. You could also provide W-2s, which showcase income from employers, or 1099 forms, which show miscellaneous income.
1099 Tax Forms
If you’re a freelancer or self-employed individual, you may have several 1099 forms. Since 1099s don’t account for your business expenses, your landlord may want to see more detailed documentation of your finances to ensure you’re solvent. If 1099 income is your only type, check out this article for more advice on demonstrating proof of income when self-employed.
Profit and loss statement
If you’re self-employed, providing a profit and loss statement for your business will give landlords a clear picture of how much you earn and what portion of your income goes toward business expenses. If you use an accounting program such as Quickbooks for your business, you can likely generate one of these statements to provide to a prospective landlord. If you work with an accountant or bookkeeper, ask them to provide one.
A profit and loss statement isn’t an official document, but it can help contextualize your income when provided in addition to other documentation.
Bank statements can be a great way to prove your financial solvency, especially if your pay fluctuates weekly, as they reflect your income, expenses, and cash reserves. Having a decent amount of savings in the bank can offset the fact that your monthly earnings may fluctuate from time to time.
Share several months’ worth of bank statements with your prospective landlord to provide an accurate picture of your financial circumstances. If you have several different accounts, provide statements from each of them.
Proof of employment letter
Some landlords may request proof of employment later as part of the income verification process. This can be a really helpful document if you’ve just started a new job and haven’t received enough paychecks to prove your long-term income. If your new role pays significantly more than your former one, the proof of employment letter will be especially helpful.
Basically, this is a letter from your employer that verifies your employment status and salary. Your landlord may request permission to contact your employer to verify the information in the letter, and this is a common way for landlords to verify your documents.
Proof of unemployment benefit
You can use your unemployment documentation to showcase your monthly income if you’re currently unemployed and receiving unemployment benefits. A landlord may be skeptical of unemployment income if you are nearing the end of your unemployment benefits. If you can provide proof of cash savings, that may be sufficient to give your landlord peace of mind that you can cover your monthly rent.
Social security or pension distribution statements
If you’re retired, you can use your social security or pension distribution statements as proof of income for a prospective landlord. Social security offers benefit verification through its online portal, making it easy to secure your records for income verification in just a few clicks.
If you receive pension distributions, you can use those records to demonstrate your monthly income. The 1099-R tax form is a good piece of documentation to use.
Proof of court-ordered payments
Alimony and child support payments also count as monthly income. If you receive either of these payments, keep detailed records to make it easy for a prospective landlord to verify your income.
If you don’t already have records of alimony or child support payments, you can request an award letter from the court.
You can use your disability insurance benefits as proof of income. You should be prepared to provide official documentation for the payments in the form of an award letter from the court or an insurance company.
If your workers’ compensation payments end before your lease ends, your landlord may require additional income documentation to ensure you can pay your rent for the duration of the lease.
The Bottom Line
There are many ways to document and demonstrate your monthly income for a potential landlord. Ultimately, landlords want to see that you have a steady income and that it’s sufficient to cover your rent for the duration of your lease. The easier you can make it for the landlord to see that you’re financially equipped to pay the rent, the easier it will be to secure a rental.
If your income is inconsistent or comes from a source, such as unemployment insurance, that may end before your lease term is up, you may need to plan further ahead than usual. Setting aside a few months of expenses in cash may help ease a prospective landlord’s apprehension in scenarios like this.