One question a landlord has to ask each time they fill a vacancy is whether the new applicant is telling the truth about their income. But perhaps the better question is this: Can you afford to take that risk?
Here are some ideas to incorporate into your income verification policy:
Start with a solid rental application. Ask for a monthly income figure from all sources set out on the page for easy reference in weeding out unqualified candidates.
Include a declaration at the end of the rental application, above the applicant’s signature, that spells out the consequences of providing false or misleading information — rejection of the application, termination of the lease and eviction. This declaration must also provide consent to a tenant background check in order to verify the information provided.
Don’t take the applicant’s word for it when it comes to income. Require the supporting documentation needed to verifiy the figure stated. Depending on the applicant’s circumstances, that may include:
Receipts or award letters for government subsidies
Court orders for support
You can also verify income using:
Bank deposit records or bank statements
Employer or client verification
It is important to place the onus on the applicant to provide you with the documentation you need to prove their income is sufficient to pay the rent–regardless of where that income may be coming from.
Follow up by ordering a credit report to verify financial responsibility and uncover any false statements.
You will need to decide what the income cut-off is for the property ahead of time. Most often, landlords look at a ratio where rent is about one third of gross income. In high-rent areas like resort towns, that figure likely will be closer to one half–or you may not find any tenants. You will get into trouble if your requirement is on a sliding scale–you let one tenant rent at one-half income to rent ratio, yet reject the next applicant based on a one to three ratio. You must treat all tenants equally.
You can’t reject a tenant because of where their income is coming from. In case of government assistance, you must allow the applicant the same opportunities as any other. However, you do have the right to reject any applicant if the income is not sufficient to cover rent. You also have the right to reject a tenant who cannot–or will not, produce proof of income.
Remember that income verification is only half the equation. You will still need to determine tenant worthiness. Take the time to talk to the previous landlord to verify that the applicant has a good rental history.
This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).
Click Here to Receive Landlord Credit Reports.