I require every applicant for my rental properties to provide income verification. I normally ask for their last two pay stubs, or a formal job offer stating monthly income for a new job. This is the easiest way for me to verify income, as when I call employers most of the time they legally cannot verify the information. I currently have a self-employed applicant. I am not sure how to go about verifying their income. What does WILMOTH do to verify income for a self-employed applicant?
ROOKIE TENANT SCREENER
In our new “gig economy” learning how to screen self-employed applicants will become more and more important. It certainly is more challenging than just requesting a couple of paystubs since typically paystubs do not exist.
There are two good ways to confirm the self- employed applicant has the needed income and also has a history of earning the minimum needed for your rental.
- Bank statements showing deposits. Obtain the last 3 months of statements and review cash inflows.
- Tax returns or 1099 statements from the prior year. These statements of reportable income show the history of the applicant earning the minimum require rent and are on a gross (before-tax) basis.
Be careful that what you are reviewing are authentic documents. If something appears unusual about the statements they may be fakes. There is a whole industry that provides fake documents today.
Also keep in mind if the tenant skips or leaves damages, garnishing wages will be an unlikely option. Your best bet will be to lien the bank account which you reviewed for approval.
Overall, it is up to you whether you wish to approve a self-employed applicant. There are many other factors that should also be an important part of your screening. Generally the best practice is to review all of these criteria together in order to make your final approval decision.
As in anything, we encourage all rental owners to obtain professional legal advise on any of the points above.