Sorry, we can’t lend you the apartment. These words from a potential lender made Rebecca’s world came to a standstill. Before jumping to conclusions, let’s understand first what exactly happened in her case:
Rebecca:
So am I not allowed to rent an Apartment?Lender:
You need to show us proof of income to be eligible for renting an apartment.Rebecca:
Yeah, I’ve submitted a copy of my income tax returns.Lender:
Sorry, we need a W-2 form or Pay Stubs.Rebecca:
I am self-employed, I don’t get Pay Stubs.Lender:
Sorry, we can’t lend you the apartment.Rebecca is an average-earning freelancer who was denied an apartment for an absurd reason. She did not have a W-2 form or a pay stub to show her income of proof. She had income tax returns and bank statements, but those were not enough to sanction her an apartment loan.
Over 60 million freelancers around the world deal with this wrath almost daily in their lives. They are subjected to poor treatment, misjudged, and often denied services that they federally are entitled to.
One such thing is approval for a personal loan, buying an expensive car or the apartment is another, and the third is health insurance. Forget buying, they sometimes aren’t allowed to rent an apartment in the absence of pay stubs. These are the grey areas where earning self-employed people face the heat and sometimes quit over excessive questions, legwork, and comprehensive paper trail.
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How to Show Proof of Income?
Proof of income is imperative for freelancers as it helps them avail services reserved for all tax-paying citizens. However, freelancers are not employees who get monthly proof of income like pay stubs and W-2 forms, due to which they frequently face issues while buying or renting necessary amenities. This article features all the possible ways through which you can rent your dream apartment being a freelancer and not worry about the lack of employee benefits.
Proof of income can be presented in the following ways:
1. Recent Tax Documents
Tax documents are of great essence when you want to show someone how much money you make. However, there are limitations too.
For instance, if it is your first year of freelancing, then using tax documents as proof of earning won’t help much because you must show tax returns for the last 2-3 years. Even if we’re paying taxes as an employee till last year, it still won’t count much, as this doesn’t guarantee your earnings as a freelancer.
Another case of tax returns not working aligns with low tax returns. Freelancers, in general, tend to lower their taxes to avoid high taxable income. This gives a false sense of impression that the freelancers are making less money.
2 . Generate Pay Stubs
Although you don’t have a W-2 form as you don’t have an employer. But you can issue a pay stub for the work you do. The prerequisite includes two bank accounts, one for your business and the other for your personal usage. Decide upon the salary you need to take out for your expenses. Afterward, you can issue a monthly salary and use a paystub generator for crafting a paystub. The above method is totally legal; speak out to any financial advisor for more clarity on the subject.
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What is a Pay Stub?
Pay stubs, paycheck stubs, payslips – they come with different names, but the meaning is one. Every pay stub includes your name, employment number, work hours (objective), paid benefits, and your earnings for the month before and after the taxes.
3. Keeping Track of Invoices
Invoices and contract copies serve as the secondary efforts regarding confirming proof of income. And secondary, they are not even entertained by all lenders or mortgage brokers.
Always keep track of invoices for payments and contracts you deliver. Additionally, keep a note of the profit and loss statements too. Not only will this help you with income proof, but it will also help you to assess your business decisions better.
4. Bank Statements
Bank statements are generally the last throw of dice; using them can prove your point, but it has drawbacks too. Bank slips can cause a loss of privacy concerning your personal expenses. It is better to use them as a last resort.
Renting an Apartment
Renting an apartment can be a cumbersome job for a freelancer. The prime reason is apparent. With no monthly trail of income coming in, landlords have a fair share of reservations about renting to freelancers.
Image Source: Pexels
Some of the common questions that dazzle landlords’ minds are:
- Whether they be able to pay rent on time or
- What happens if their work goes off after few months of the tenancy
- Who’ll be the guarantor considering they don’t have an employer
The questions are generic, and we can’t blame the landlords for thinking on these lines. Lenders want to stay assured about who they are renting to and avoid choosing a financially unstable tenant.
But there is hope, a bright one too. One good way of dealing with this lies in educating your potential client about your work profile. An upfront approach to clarify doubts fills confidence in the mind of the listener. Words merely won’t be enough, so show them your tax returns for the last 2-3 years. A bank statement for the previous 6 months will also improve your chances of getting a ‘Yes’ considerably.
Also, if the need arises, don’t hesitate to ask them about involving a guarantor. For this, make sure you have everything in readiness before pitching for an apartment. Still, if nothing works out, try out a final resort by asking them to submit the security deposit in cash. Don’t forget to get a written receipt of it for the record.
To Sum Up
Working as a freelancer is challenging; there are no doubts about it. They are not assured of landing clients, timely payments, financial security, and even mental health. But as the world heads to being a Startup Jungle with millions of people preferring to be self-employed, the future seems brighter. Hold on tight, and look for alternatives to seek simple solutions to obstacles. Keep believing in yourself; keep freelancing!
Featured Image Source: Unsplash
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