Proof of Income is Crucial: Here’s Why
As a landlord, you know that tenant screening is one of the most important parts of your job. After all, you are entrusting your investment to the person who resides at your property. So, you check everything out and you give your new tenants the green light to move in. When the rent is due, however, you find your hands empty.
Your new tenant didn’t pay their rent when the rent was due. Maybe they asked for an extension. Maybe they gave you an elaborate story (or excuse) as to why they don’t have your rent money. Maybe they are dodging your calls. Or maybe they just genuinely had a banking issue and will get your money to you as soon as possible.
Whatever the reason is, you don’t have your rent money. And, well, that’s an issue. If you didn’t confirm the proof of income, how can you be sure that your tenants are even able to afford the property?
This is one of the most crucial steps in renting out your Atlanta investment property. Think about it: Most tenants are not going to go through your tenant screening process and move into a new place that they don’t intend to pay for. That’s a lot of work just to get evicted in a month. But, sometimes, the responsibility they just took on may prove to be too much. Or, the job they claim to have may be unstable.
Verify income before you agree to rent to potential tenants. Call the employer, check pay stubs, and so forth. You are looking for a steady income history – and an income that will be enough to pay your rent and the tenant’s other bills (consider using the 3xs rule).
You may consider using one or more of these on your quest to confirm proof of income:
Pay stubs. Notice the amount of the current check and the year to date. This will give you an idea of how long the employee has been there and/or how steady the income is.
Employer verification. Note that it is best if you call to verify, rather than receiving a call from someone claiming to be the employer. This will cut down on the chance of fraud.
Tax returns. Keep in mind that this will fill you in on what the individual made the year prior. You will have to determine whether or not their situation remains the same.
Offer letter. If your potential tenant is new to the area or changing jobs, having an offer letter on company letterhead is an option. This should state the individuals intended salary.
Social security or retirement statement. If the applicant is on disability or is of retirement age, they may not have employment income to report. Instead, they will have dividend statements or social security statements that will show how much is received and when. This will give you an idea as to whether or not he or she can afford the property.
Remember, when screening your tenant, you want to confirm that there is enough money to pay the rent each and every month. Never assume anything. Rather, always proceed with confirming the stated proof of income. If you cannot confirm it, don’t offer your rental.
Marina Shlomov, a managing partner at ALH|Podland Rental Homes Property Management is the author of many articles on Landlording, Property Management, and Real Estate Investing. A residential builder in the state of Georgia since 1999, Marina is an investor herself. Her property management company is intended “For Investors” and “By Investors” for a simple reason – she knows what investors’ goals are and she works hard to reach their goals. In her spare time, Marina likes to spend time with her family, friends, garden, read and travel. Check her out at www.alhpodland.com. You can find Marina’s articles and comments at @rentalhomesatl on Twitter, on Facebook, Google+, Blogger. and YouTube, Bigger Pockets and REI CLub and LinkedIn.