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5 tips for buying or renting a home when you don't have a traditional 9-to-5

Experts share steps self-employed people can take when renting or buying a property, especially when they don’t have traditional W-2s or employer letters.

Lambeth Hochwald
Twenty/20

Rebecca Lake, a personal finance expert and the founder of the blog Boss Single Mama, was able to secure mortgages for two homes: one in 2016 and another in February of this year, despite not having a W-2 form that would verify her income. 

"Lenders still want proof that you can pay back what you're borrowing to buy a home," Lake says. "So if you don't have a W-2, you'll need to be prepared to show them something else."

For Lake, that evidence of her financial stability included two years of tax returns and a self-prepared profit and loss statement. "My lender also reviewed my bank statements and investment account statements to see that I had sufficient assets on standby to pick up the mortgage payments just in case I experienced any changes in my income." 

When it comes to real estate, some old-fashioned principles are still in place around employment, even though 56.7 million Americans are freelancers, according to the Freelancers Union

But if like Lake, you are your own boss, here are five ways to prove your balance sheet is robust enough to secure your new place.

Transparency is key 

If you are self-employed, expect to be as transparent as possible when it comes to sharing additional documents with a potential landlord or lender, in lieu of a letter from an employer, for example.

Depending on the lender and your circumstances, you might need to provide more paperwork in the form of contracts you have with clients since those are written agreements stating that your clients intend to continue their relationships with you.

"You may also need documents verifying your past and future income," says Matt Frankel, a certified financial planner and founder of Frankel Wealth Management. "Audited financial statements and a letter from a CPA could certainly be a part of your application, but they aren't likely to be enough all by themselves."

Put more money down

One way to work within the system is to offer a few extra months' rent to a landlord upon the signing of a lease or putting more cash down in the case of a home purchase to offset your mortgage requirements.

"Prepaying up front in the case of stringent rental requirements or putting more in a down payment if you're looking to buy is one way around conventional ways of confirming sustainable income," says Nate Nead, CEO of real estate firm Nead LLC.

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Set up an LLC

Setting up an LLC is another way to work with the conventional requirements, Nead says. However, it's important to note that it generally takes two years to set up an LLC, so this wouldn't be a more immediate solution. 

"The way an LLC works is that you can input all of your 1099 income and pay yourself a W-2 from that LLC entity," he says. "Yes, it will still take time, but you'll be better prepared when you're asked for financial statements and proof of income in the future."  

Focus on your credit score

If you don't have several years of pay stubs, a high credit score will help your candidacy. "This demonstrates your ability to pay off debts and be responsible with money," says Sam Otto, CPA and owner of Uncle Sam's Accounting. If, however, you have a low credit score or zero credit history, Otto recommends looking into setting up a secure credit card.

With a secured credit card, you are using money that you put down in a security deposit account — "essentially borrowing money from yourself," Otto says. But like any other credit card, you can charge purchases up to a set credit limit and pay it off on a monthly basis.

If you are looking to build up your credit, this is one way to create a consistent track record for prospective landlords and lenders.  

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Ask your biggest clients to vouch for you

If you're a freelancer who works predominantly with major companies, you can obtain letters or records verifying your income for that company.

"For example, I was working as a bookkeeper for a construction company and I was being paid a substantial amount to do so," Otto says. "When I applied for a place to rent and listed the income, my landlord simply asked for a letter from the construction company verifying the monthly income."

Ultimately, the best steps you can take as a gig worker or side hustler to up the odds of getting approved for a mortgage or a lease on a new rental is to pay down debt, keep your income consistent for as many years as possible, and build up your savings.

"The more proof you can provide that you have the ability to pay," Lake says, "the stronger your case."

Lambeth Hochwald is a reporter in New York City who covers real estate, family, and issues that matter to women.

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