One of the most important parts of the tenant screening process is to make sure the prospective tenant has verifiable employment and income.
This tenant screening process is important for two reasons:
- It helps you ensure that the applicant has the income to pay rent regularly and on time.
- It helps you ensure that the applicant has stable employment and income.
Sometimes, a tenant might have plenty of cash on hand to pay rent every month, but they could still be an undesirable type – like someone with a history of being evicted – that you don’t want in your property.
As an Abingdon landlord, you want to select the best possible tenant – every time. Today, we’re going over everything you need to know to properly verify the employment and income of your prospective tenants.
How Landlords Can Verify a Prospective Tenant’s Employment and Income
Run a Credit Check
The information you discover on a prospective tenant’s credit report can make or break the deal.
A credit check provides you with insight into your prospective tenant’s financial health, and lets you know if they have been able to fulfill their financial obligations.
And it’s not too hard to uncover your applicant’s credit history. All you have to do is order a credit report through a reporting agency or tenant screening service. By doing so, you’ll learn:
- Their credit score
- How much debt they have
- If they’ve ever filed for bankruptcy
- If they have any judgments against them
- If they’ve ever been evicted
You can also learn the applicant’s total debt to income ratio. For example, if they make $40,000 a year but have $40,000 in debt, they might struggle to pay their monthly rent.
A credit report doesn’t list a person’s current or previous employers, but it does show who else has run a credit check on that person in the past. Because employers often run credit checks on applicants before hiring them, you can see which employers have also checked your prospective tenant’s credit recently.
This will not prove one way or another whether the company actually hired them or not, but that’s why you should always check your prospective tenants’ references.
Check Their References
First, you should call your prospective tenant’s employers to verify they’re actually working where they say they are. Sometimes, a dishonest applicant may lie about their employment and write down a fake phone number – so it’s important to be sure.
When you call, be sure you’re calling the main number for the business and ask to speak to human resources or to the manager directly. Ask questions about both their character and how long they’ve been employed at the company.
If you find that a potential tenant has been employed for a considerable length of time, you’ll be able to determine that they have a stable history of employment and a stable income.
Landlords regularly ask employers directly to confirm the income listed on the rental application. If the employer refuses to provide this information for privacy violation reasons, have your tenant sign a release of information form. That way, employers will know it’s okay to release their employee’s info.
Second, you may want to call their previous landlords to find out how the tenants behaved while living in their past homes. It’s wise to insist that all of your applicants disclose the names and addresses of at least two of their previous landlords.
Ask former landlords questions like:
- Did they habitually pay rent on time?
- Did they follow the rules and non-monetary agreements they made?
- When did they move out, and why?
- Did they provide advance notice that they were moving out?
- Were they evicted?
- Did they commit any crimes?
- Did they leave the property in good condition?
- If they re-applied today, would the landlord accept them?
If the previous landlord tells you something negative about the prospective tenant, it may be a clue that they’re unable to fulfill their obligations to you. They could be economically unstable or totally irresponsible.
Remember, though, that current landlords are not necessarily the most reliable sources of information on current tenants.
If the tenant is a fantastic renter, the landlord may not want them to move and could offer a lukewarm to negative reference in the hopes of keeping the tenant around. If the tenant is the world’s worst renter, the current landlord may offer a glowing reference to get rid of them.
This is what makes it so important to collect multiple references in all categories and follow through on calling them and asking the crucial questions.
Use the right process to screen self-employed tenants
Many people are self-employed these days – not just Abingdon landlords.
If your prospective tenant is self-employed, they won’t have a paystub. The best thing you can do is to request copies of their bank statements from the past three or more months to get a good picture of their average monthly income.
Because this can be trickier verify, you can also request to receive a copy of the tenant’s federal tax records. Have your prospective tenant fill out then submit Form 4506 to the IRS. The only problem with this process is that it can take up to 60 days to process this request, and most landlords and tenants alike cannot wait this long.
An easier and faster way to verify their income is to file Form 4506-T, which is a request only for a transcript of the tenant’s tax returns. This typically only takes a single business day to receive and contains the information you need to verify a self-employed individual’s income.
Be Wary of Fakes
As a landlord, you should always do your due diligence when it comes to tenant screenings.
While most of your prospective tenants will be upstanding members of the community, you may sometimes need to dig a little deeper.
Ask detailed questions if you have even the smallest suspicions about the listed references for a prospective tenant. Check to see if the employer says the applicant has ever been any trouble, makes enough money to cover the rent, and maintains gainful employment.
You should ask the person you’re speaking to verify their name and position within the company, and double check with what was written on the application in front of you. Sometimes, a tenant could have friends or others pose as their supervisors.
If your prospective tenant cannot provide you with any of their paystubs, ask for W2s or 1099/1040 forms. If they cannot provide these, it may be time to move onto the next applicant.
And remember, if you need any extra help verifying your tenants, reach out to an Abingdon property management team and rely on their expertise. Our team at Bay Management Group would be happy to help you select the best tenants for your properties.