The tenant screening process is essential to finding the perfect tenant. Verifying proof of income is how you can make sure a prospective tenant will be able to consistently pay rent.
When verifying proof of income, it’s also important to confirm that the prospective tenant has a legal occupation. Even if a tenant has a lot of cash on hand, it does not mean the money is coming from a stable job. In addition to this, you should also compare the prospective tenants’ income to the rent price — they may not be able to realistically afford the unit. For more information on how to screen tenants properly, take a look at this page.
How to Verify Income
- Request the proper documentation.
- Contact their employer (make sure to ask the tenant where they work) and issue an employment verification request.
- Run a credit check.
Obtaining the Proper Documentation
There are a few different kinds of documents you can request from the prospective tenant.
- Pay stubs: This is easy to get ahold of. Just ask the prospective tenant to show you their pay stubs for the last two or three months.
- W-2 income statement: The W-2 form is a standard document that is credible and reliable. The prospective tenant can request the form from their employer and present you with a copy. Keep in mind, however, that the W-2 form is not always completely current. The W-2 is a form that’s filled out annually and doesn’t account for promotions or bonuses that may occur throughout the year.
- Federal income tax return: The IRS 1040 is a legal document that is comprehensive and accurate. Tenants may have a bit of difficulty finding this document, though. It’s a bit lengthy and not all employers provide it or ask for it to be filed.
- Social Security statement: This will provide you with information regarding government income, which is very stable and easily verified.
- Pension distribution statement: The 1099-R on someone’s tax return is a great source of income that is consistent.
- Bank statement: Obtaining a bank statement may be a little intrusive to the tenant, but it showcases very current information. Also, it may be difficult to determine how steady the cash-flow is if the tenant has a non-traditional source of income.
- Severance statement: This is for someone who has been laid off. It’s a one-time large cash deposit for the prospective tenant so they can have several months’ rent. But, beyond that, there isn’t an ongoing influx of cash.
- Unemployment statement: This is a government document that shows guaranteed income for a certain period of time.
Contacting the Employer
You can email or call the tenant’s employer. Both of these methods are quick and easy, but keep in mind that emails sometimes get ignored or lost in people’s inboxes and a tenant’s friend can easily pretend to be their employer on the phone.
Here is an example of a personalized email:
Hello [Employer’s Name],
I am currently reviewing [tenant’s name]’s rental application and wanted to request employee verification. Could you please provide me with [tenant’s name]’s credentials? I would like to confirm what position they hold at the company, if the stated salary amount of [$] is correct, and whether they are reliable and responsible. If you could please get back to me, I would greatly appreciate it.
Though sending an email is less time-consuming, calling the employer can give you a better feel of the person. Start off with introducing yourself and why you are calling. You should listen to their tone of voice and ask them important questions, like:
Q: Can you confirm that [tenant’s name] works for you?
Q: What do they do for the company?
Q: Can you verify that the salary amount of [$] is accurate?
Q: How would you describe their work ethic?
Watch out for red flags like an employer’s negative comments, the employer’s hesitance to answer questions, the tenant lying about their employment, or the tenant providing fake references and/or forged documents.
Running a Credit Check
If contacting the tenant’s employer doesn’t work out, you can always rely on the information presented in the credit check. First, ask the tenant’s consent for a credit check. Usually, a tenant gives authorization in the rental application. Make sure the individual is 18 years or older and they have completed the rental application. Next, collect a credit check fee from the tenant — this will cover the expense of requesting a credit report.
If everything checks out and your prospective tenant proves to be responsible and reliable, then you may proceed to the leasing process.