How to Verify Income for a Tenant
One of the most important tasks for a landlord to do during the tenant application process is to verify the income of a prospective tenant. It's easy for a tenant to say that they make a certain amount of money to qualify for a home. It's a whole different story to verify the income that they make and even their employment history if that may become necessary. If you're wondering how to verify the income of an applicant, then here are the steps that you should consider taking immediately:
#1. Request Pay Stubs, W2, Bank Statements, or Tax Documents
One of the easiest ways to verify an annual income is to simply request the documents that prove how much an applicant makes. This can be a little trickier for applicants who are self-employed and may not even have a traditional bank account, which is why the tax documents can be the one place where you can still get the info you need. You'll want at least 3 months of these documents and for those who are self-employed, you might want 2 years of data to make the right decision.
#2. Contact the Listed Employer for Verification of Employment
It's actually pretty easy to falsify the requested documents above. Of course 999 out of 1,000 applicants are likely to be forthright and honest, but you don't want to skip the verification process if there's that one tenant out of 1,000 that's try to fake their way into one of your properties. A simple phone call to an employer for verification of their length of employment is often all that is necessary to confirm the submitted documents. For those who are self-employed, you can verify the presence of their business in a number of different ways: 1. Look for licenses required for the business. 2. Look at website traffic and accepted orders. 3. Look for online review sites, feedback, and other reputation related items. The more exposure for a business that you find, the more likely the self-employed applicant is telling the truth about their business practices.
#3. Run a Credit Check
Although financial health isn't an indicator of all things good or bad about an applicant, it can give you an idea of what you might need to expect. It will also let you know if there is an active bankruptcy, if there are any judgments against them at the moment, and many credit checks will even show you if they've been evicted from a previous rental. Some landlords base rental decisions solely on the credit score. Others base it solely on the income of an applicant. If you base a rental decision off of all the information you get from income verification, however, you'll get a better picture of how good an applicant happens to be.
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