Minimum Income Requirement for Self-Employed Applicants
This blog post is a guide to help prospective tenants who may have questions about how we qualify you (based on your income) when you’re self-employed or receive a FORM 1099.
If you are a sole-proprietor, please use line 31 on your Schedule C. If you receive one 1099 or several 1099’s, it will also be line 31 on your Schedule C. Sometimes we consider the difference between line 7 and 31 depending on your expenses.
See below for an example.
We will take your line 31 on your Schedule C and divide it by 12. This must meet the minimum monthly income requirement.
For example, if you earn $54,000/year:
We take your income, divide it by 12 months = $4,500/month average income.
This amount is then divided by three to come up with the maximum rent you can afford. In this example that would be an apartment for $1,500/month.
We do try and evaluate each situation on a case-by-case basis and will work with you if you have any questions or a non-traditional business that requires closer examination of your tax returns as a whole.
Above is the rule as to how we qualify you based on your income. Below you will find an explanation of all the documentation required.
We will require the most recent year tax return you have filed and a year to date Profit and Loss (P&L) Statement from a Certified Public Accountant if you have not yet filed your returns for the current year. For example, if we are in February of any given year, you may not have filed your tax returns for the year prior. We will need a P&L from your accountant AND twelve months of bank statements for the year the P&L is for.
If we are in November or December of any given year, you obviously will not have your tax return for this current year. In this situation we will require bank statements for the entire year along with a YTD P&L from your accountant and a prior year tax return.
We understand this is a lot of paperwork to gather, however we must ensure every landlord that the prospective tenant is qualified.
If you have any questions please contact us!