As we all wait for the economy to fully recover from recession, we’ve heard reports of landlords skipping over essential steps in the tenant screening process. Thorough tenant screening is one of the best investments a landlord can ever make—some suggest that it can help you avoid about 99% of the problems landlords have with their tenants. When prescreening tenants, don’t skip over two essential pieces of background checks: verifying tenant income and employment. 3 Reasons to Verify Every Tenant’s Employment and Income 1. Not all tenants tell the truth. Tenants reflect the whole of our society, and your potential tenants are a mix of honest, dishonest, professional liars and ex-cons. When they tell you where they work and how much money they earn, they might be telling the truth—or they might not. Verifying employment and income is the only way to know for sure. Landlord Tip: Be wary if the tenant insists you talk to a certain person at their place of employment—they could be directing you to a friend who is posing as the employer. 2. Having money doesn’t equal having a job. A nice car, expensive clothes and shoes and armfuls of jewelry can all be purchased on credit. A landlord we know was conned by a nicely-dressed applicant and signed a lease with her. Later, she found out that she had been laid off six months earlier from the employer she listed on the lease application. Making a quick telephone call to the employer would have avoided this situation. Landlord Tip: Look up employer telephone numbers yourself, either online or in the phone book. Some tenants will provide false information. 3. Keep your tenants safe from harm and your business safe from risk. Verifying income and employment helps you avoid renting to tenants involved in criminal activities. It’s easy to be impressed by a tenant with cash in hand to pay your security deposit and rent. But failure to verify a tenant’s source of income—with paycheck stubs, income tax returns (in the case of self-employed applicants) and phone calls to his or her employer—is almost asking for trouble to move into your rental property. Landlords who fail to screen properly have been held liable for harm suffered by neighbors or other tenants. Landlord Tip: Be prepared to submit a written request for information. Many employers will not provide salary info over the telephone. Don’t be in such a hurry that you can’t invest the time necessary to obtain complete information. Prescreen Tenants for Complete Peace of Mind The best way to be sure you’re renting to a qualified tenant is to prescreen all rental applicants. 100% online tenant screening is easier than ever — and it can reduce your risk!
Verifying a tenant’s employment history and income is a vital step to approving his or her application. The unfortunate economic situation makes it even more important; while many good people have lost their jobs through no fault of their own, your tenants still need to pass your litmus tests, including meeting minimum income requirements.
Here are five reasons to verify employment and income on potential tenants:
1. Because landlords and property managers must know that each tenant who signs a lease agreement can live up to its terms—including paying the security deposit and upfront fees, plus the rent in full each month. Whether the tenant will pay on time each month is certainly not guaranteed—but you need to know whether they even have the capability before you sign a lease.
2. Because even if the tenant has the upfront fees ready to hand over, you’ll want to know if their employment history is solid. Holding a job is no guarantee that a tenant will pay rent on time, but it helps!
3. Because verifying the source of a tenant’s income is a great way to prevent those engaging in illegal activities from becoming your problem. In other words, if a tenant has plenty of cash but no job, be suspicious. Same for obvious high spending with a low income. It is not discriminatory to ask a tenant to prove how much money they make. Remember: pay stubs are your friends.
4. Because tenants sometimes go to great lengths to pull a fast one on a landlord. Just because they say they’re working for Jones Construction Company doesn’t mean they do. Ask for proof. Call the supervisor—and make sure that when you do, you’re actually speaking to the supervisor, not a friend pretending to be one.
5. Because knowing that your new tenant is stable and can afford the rent is one less worry for you. And landlords and property managers need to reduce worries as much as possible!
As Landlord, You’re in Control
As a landlord, you know only too well that you cannot control your tenants’ behavior, or that of their guests. You can’t control the occasional damaging wind storm or unexpected tree limb on the roof. But in the beginning, at least, of the landlord/tenant relationship, you are in complete control: as long as you comply with all applicable housing laws, you alone decide who is approved to rent your property. There are a number of factors you may use to decide whether to reject an applicant. Today we’ll look at employment and income.
Smart Landlords Verify
The rental application should contain the following information that you must confirm prior to approving the applicant: current and previous addresses, current and previous employment, income, Social Security and driver’s license numbers, plus personal and rental references. You can do this yourself or with a professional tenant screening service.
Verifying Employment and Income
You can simply call the employers listed on the rental application; however, many employers are hesitant or have policies against releasing information over the phone. You may need to request verification in writing. It’s not a bad idea to have this information in writing as a matter of procedure. You want to be sure your prospective tenant is currently employed, and has a reliable work history.
You can also ask the applicant to provide proof of employment and income, such as pay stubs. Don’t neglect to verify these with the source of the income to be certain they have not been falsified—or even fabricated completely. For sales or commission-based income, review at least six months worth of paystubs, or have the applicant supply you a copy of their previous year’s tax return. Ask for verification of any other sources of income to be used toward rent payments, such as child support or alimony. If any stated income cannot be verified, you do not have to include it when determining minimum income requirements.
When to Be Suspicious
Be wary of business phone numbers supplied by the applicant if they don’t sound like legitimate businesses when you call. Likewise, be suspicious if the applicant insists you speak only to a certain person—they could be a real HR clerk, or they could be a friend who will supply false information. Certainly, legitimate businesses don’t always answer the phone properly, but let your intuition be your guide—it will tell you whether you need to dig a little further.
You should also be on guard if your prospective tenant has plenty of cash for security deposits and first month’s rent, but no verifiable sources of income. If income is inconsistent with obvious spending patterns, be cautious. Cash without proof of income, or extreme spending on a low income could indicate illegal activity. You don’t want to have problems down the road with either a tenant who can’t pay rent regularly or with criminal activity on your property.
Prescreen Tenants for Complete Peace of Mind
The best way to be sure you’re renting to a qualified tenant is to prescreen rental applicants. It’s easier than you think to do this online —plus, you’ll reduce your risk and your stress level!
Next Post: Checking Tenant Credit and Criminal History