Proof of Income is Crucial for Landlords
When screening new tenants, it is important to verify their income in order to protect yourself from losing money in case the tenant for any reason is unable to pay rent.
Having a proof of steady income that is enough to pay the rent can reduce the risk of losing money during eviction. It also helps to ensure the tenant does not lose their home because of eviction. So what do you look at when verifying tenant’s proof of income?
3x income rule
Apart from stable source of income, landlords also take into account tenant’s gross yearly income which should be three times the rent of the apartment. However, you can make exceptions to this rule if the potential renter has good credit or steady work history. By looking at a few pay stubs, you can establish if a potential renter has the financial capacity to rent your apartment. This is only possible with salaried and freelance workers who have filed W9s forms. A W2 or 1099 can also provide an indication of the potential tenant’s ability to pay rent on time and in full.
Employer verification
If a potential renter works on cash-only basis, you can conduct employer verification to get clear picture of their finances. In cases where a potential renter has just changed jobs, ask for a copy of their offer letter to verify their salary.
Tax returns
Some landlords use tax returns as sufficient proof of income because a tax return indicates what an individual made the previous year.
Social security statement
For retirees, a distribution statement from social security, a retirement fund or a pension fund can be used to verify the income. Students without salaried jobs can prove their income by providing information about financial aid or by finding a consigner, usually a parent or guardian.