SPIA as Proof of Income for rental?

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TetrisCollider
Posts: 43
Joined: Sun Nov 18, 2018 3:03 pm

SPIA as Proof of Income for rental?

Post by TetrisCollider »

Appreciate in advance the wisdom of the forum.

I am planning to retire at 55 early next year (2022). This year (2021) we are selling our house (primary residence) and have already started renting. DW does not work, so our income is currently based on my salary. We are planning to rent (vs own) for at least the next 10 years out (most likely for the rest of our lives). I am expecting (if my Fortune 100 company doesn’t fold) to start receiving pension at 62 (that should cover all of our expenses). We have savings that will cover all of our needed expenses for the next 7 years (until I start receiving pension). In addition, I have company stock option rungs that I will be exercising over these 7 years.

Our plans most likely will involve moving several times over the next 7 years and of course as part of rentals, we will be requested to show Proof of Income. Since I will no longer have a salary and we do not want to share our financial information with landlords, does it make sense to buy a 7-10 year SPIA that we will use as Proof of Income? And if yes, what should the amount of SPIA be – an amount that provides our estimated monthly rental ($2,500) or a bit more (based on Income vs Expenses ratio requirements)? Again, if SPIA makes sense for this scenario, what companies are best to deal with and what gotchas should we be looking out for?

Are there any other options that would provide for Proof of Income that would not require a disclosure of our financials?
For some reason, people that know nothing, seem to know everything...
gclancer
Posts: 738
Joined: Sat Apr 27, 2013 10:34 am

Re: SPIA as Proof of Income for rental?

Post by gclancer »

A win-win may entail prepaying your rent in advance should you be able to negotiate a corresponding discounted rental rate. I think it’s fair to say that most renters don’t have liquid assets sufficient to prepay rent (they pay rent with on-going earnings). Prepaying rent may end up having a better ROI than investing in fixed income in the current interest rate environment.
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Watty
Posts: 22348
Joined: Wed Oct 10, 2007 3:55 pm

Re: SPIA as Proof of Income for rental?

Post by Watty »

Lots of retired people rent all the time. I would not buy a SPIA just for this since the landlord should be willing to accept other proof that you can afford it. As I recall there have been other threads about this where someone people who own rentals posted how they handle this but I do not recall what they said. You may be able to search and find those old threads.
gclancer wrote: Mon May 03, 2021 12:01 pm A win-win may entail prepaying your rent in advance.....
In prior threads I recall people who owned rental properties saying that they would not allow people to prepay a years rent. The problem was that it would then be very difficult to evict them if they were causing lots of other problems.
Rex66
Posts: 580
Joined: Tue Aug 04, 2020 5:13 pm

Re: SPIA as Proof of Income for rental?

Post by Rex66 »

I’m not sure every renter will be eager to accept this as proof.

Somebody will but it’s a pretty costly adventure

Additionally they likely are capable of finding more about your financial status without you actually disclosing the details.
adamthesmythe
Posts: 4149
Joined: Mon Sep 22, 2014 4:47 pm

Re: SPIA as Proof of Income for rental?

Post by adamthesmythe »

Corporate landlords will want to see proof of income that is a sufficient multiple of the rent. It may be hard to persuade them that an SPIA that pays a barely sufficient amount is enough. Non-corporate landlords may be more flexible. Easiest will be if you can demonstrate a sufficient amount of regular withdrawals. I hear that you don't want to provide detailed information, but you should be aware that this may greatly reduce your options.
gclancer wrote: Mon May 03, 2021 12:01 pm A win-win may entail prepaying your rent in advance should you be able to negotiate a corresponding discounted rental rate.
I have read elsewhere that offering to pay cash in advance can be considered very suspicious.
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