Verifying a tenant’s income is challenging because so many people are already having trouble making ends meet as a result of inflation and other price increases. This is why many people are renting out their extra rooms to cover their housing costs. You could be worried that your potential tenants can’t afford the rent or won’t be able to pay on time. Before agreeing to let a complete stranger move into your home, you should check their income with the help of a property management company, either online or in person.
How can you verify their income and employment status?
In this article, we’ll show you the how.
Apply the 3:1 rule.
It’s been said that the ideal income-to-rent ratio is three times as high as the rent. If a tenant wants to comfortably pay their rent, they should be making at least three times the amount. It’s a decent thumb rule for tenants to make at least three times the monthly rent you’re asking for, but you should still research the local median income to be sure. Then, to get a sense of the real ratio in your location, compare it to the typical asking price for your type of lodging.
Insulating your home
Tenants will be able to afford your monthly rent if you insulate your property adequately, reducing their heating and cooling costs. The tenants will respect you more as a landlord and will likely be more careful with your property. The change in the season won’t affect their ability to pay the rent, either.
Don’t forget the power of words!
Tenants will appreciate it if you’re accessible, willing to fix issues, and mindful of their rights. That’s why they’ll stick around and do their best to treat you well for as long as they can because of this.
The Required Formalities
Now that we’ve covered the basics of finding and keeping decent tenants, let’s talk about the documents property management companies may use to check their financial stability. If you know what to look for, it shouldn’t be too difficult.
Slips of pay
If a landlord ever has any doubts about a potential tenant’s financial stability, they should only ask to see a copy of their most recent pay stub. A person’s name, place of employment, and contact information are all displayed. They also include their regular pay schedule, incentive payments, and total annual compensation before taxes. Ask the applicant for their two most recent pay stubs, which the company can check over the phone.
Downloadable account statements PDFs or screenshots of your bank statements can be emailed to you the same day you request them. In addition, they reveal the tenant’s current financial status, including whether or not they have lately gone over their overdraft limit or bounced any checks. They also need to have the tenant’s name and address on them.
Tenants who are self-employed should be asked to provide the most recent two years’ tax returns. These may be mailed to you or sent to you online in pdf form. It gives you a snapshot of the tenant’s overall financial situation.
Certification from the tenant’s place of employment
Asking the tenant’s employer for a letter is a wonderful technique to verify their employment status. The renter’s information, such as their name and pay, will be displayed alongside the company’s name and logo, as well as that of the owner and manager. Instead of asking for a bank statement, you might just call the employer to confirm the information.
Proof of Social Security Benefits
You have the right to get a copy of your tenant’s benefits statement if they are receiving government aid. Add this to their other financial and tax documents for added insight.
Documentation of Child and Spousal Support Payments
Child support and spousal maintenance payments can be a source of income for some people. You might ask for proof of a court order specifying the monthly amount that the tenant will receive in this type of payment. Typically, you can verify this data without much trouble by consulting public documents. A tenant can easily get this from a lawyer or town clerk. But this solution only works if the ex-spouse pays on time, and it doesn’t give a full picture of the tenant’s financial situation.
Property managers use a mix of the methods described above to check the prospective tenants’ evidence of income, and you can also assure that they will be able to afford the rent by beginning with an amount that is reasonable for them to pay each month. A happy tenant is a loyal and good tenant, which will save you money throughout the course of their tenancy. It is important to assist those who are having difficulty paying rent since it will make their lives much simpler.