Verifying Income When Tenant Screening

By Kaitlin Hurtado on February 21, 2022

When it comes to being a landlord or a property manager, one thing you can do to set yourself up for success is establish and follow an effective tenant screening process. When screening tenants, there are multiple factors you are going to be looking for in an ideal tenant, from their rental history to their ability to pay their rent on time and in full every month. A tenant’s ability to pay their rent is essential to the success of your property – if they are unable to pay rent, especially for several months, it can lead to a serious loss of income and lead to you having to deal with a possible eviction. You may be wondering how you can verify income during your tenant screening past asking what an applicant’s income is on their initial application.

Keep reading for how you can verify income when tenant screening.

Photo: Pexels

Verification Method #1: Request supporting documentation

It is all too easy for an applicant to fill out their rental application and make up a number when it comes to portraying their rental income. It may not even be a decision with bad intentions, but if they stretch the number of their rental income to get a rental unit and actually end up not being able to pay their rent as agreed, it is going to be a major problem for everyone involved.

With that being said, request documentation that can actually verify their income. Depending on if the applicant is self-employed or not, the type of documentation they can provide may vary.

One common form of documentation can be paystubs. Requesting a few months’ worth of paystubs could give you an idea of what an applicants’ income looks like. Is it the same amount paycheck to paycheck? Or does it fluctuate without any pattern? The latter may be a cause of concern if the applicant does not have a source of steady income if they can have enough to cover rent one month, but not the next.

A paystub can also offer you other information, such as their year-to-date earnings, which can help you validate total income if you are looking at a paycheck later on in the year.

Another common form of documentation can be an applicant’s W2 form, which will show you the amount of income they had for their previous tax year. Looking at a W2 can help you verify the income numbers they provide on their rental application.

If a tenant is self-employed, however, they likely may not be able to provide the previous two documents, but there are documents they can provide that can verify their income. First, they can provide bank statements. If they don’t have paystubs to verify a steady stream of income, bank statements can. Just like paystubs, requesting a few months’ worth of bank statements can give you a general idea of what their income looks like — whether it’s steady or fluctuates.

You can also request a customer to submit a Form 4056 or Form 4056-T to the IRS to get their complete tax return copies. The former will require a bit more patience and communication as it costs $57 and can take up to 60 days to process. The latter is free and has an expected turnaround time of a day and will get you a transcript of the return.

Verification Method #2: Check their job/employment reference 

If your rental application already asks for rental history and past rental references, you may want to ask for employment references as part of your tenant screening process. Sending out an Employment Verification Request can help get you the information you need. If you have an applicant’s employer information handy, you can contact them directly to verify that they work there. Sure, this may take some more time than if you were glancing at a simple application or a paystub,  but it can help you verify their income and their current employment status.

Whenever possible, contact the Human Resources department of their company. While their application may have listed a direct colleague or supervisor, it’s best to contact the HR department. They may elect to speak to you directly for verification, or they can transfer your request to the applicant’s direct supervisor.

Questions you will want to consider asking may include:

- Does the applicant currently work there?

- How long has the applicant been employed there?

- What is their salary (weekly, monthly, yearly)?

Most often, these types of requests to an applicant’s employer will require the applicant to acknowledge and authorize the request so make sure to coordinate accordingly.

Tenant screening may seem like a time-consuming process, but when done right, it will be extremely beneficial to you and your property when you have a roster of good and trustworthy tenants. Verifying an applicant’s income when tenant screening can help you make an informed decision on whether or not the borrower will be able to pay their rent as agreed, and is definitely worth the initial extra effort.

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