In a previous post, we talked about tenant screening practices, and how to best set yourself up for success when processing a prospective tenant’s application. Part of that process is income verification. Every landlord wants to get the rent check in the mail each month, so verifying that the tenant has sufficient, and verifiable, income is important.
How does a landlord go about this? Do you just take the tenant’s word? Erin Eberlin wrote an article on The Balance which provides three key elements to verifying income:
- Request paystubs and W2s, or bank statements and Form 4506 from the IRS
- Contact their employer and issue an employment verification request
- Run a Credit Check
Paystubs and W-2s show that your prospective tenant does have income. It is also important to request the most up-to-date information, such as the most recent pay stubs. For a self-employed prospect, bank statements can be used. Many landlords have a rule that a tenant must make three to four times the monthly rent amount in order to be considered for a property, which is also a good practice.
Paystubs are one thing, but what if the prospective tenant just quit, or got fired from their job? The second step is to verify their employment, and to make sure that they are still currently employed where they say they are.
Finally, by running a credit check, a landlord can see how a prospective tenant pays their bills, as well as other information such as any history of bankruptcies, foreclosures, and judgements.
By using these steps, the landlord can confirm that the tenant does actually have income, that they do currently have a job, and that they are indeed paying their bills with that income. While landlords and management companies can’t predict the future, looking at a tenant’s past, and current, financial situation is a good way to start off on the right foot, and is a good practice to be consistent with.
To view the full article, “How to Verify a Prospective Tenant's Income and Employment,” click here.