As a landlord, you want to protect your interests by renting out your property to responsible tenants. Since many disputes between landlords and tenants relate to money, such as For example, late rental payments, the review process should include reviewing the employment status and wages of a potential tenant. By checking these details before renting out your property, you can avoid financial problems or costly and time-consuming evictions.
Remember that income related questions (and ultimately the review) don't give you a complete picture of whether an applicant suits you well. You want to ask a wide range of questions to get more insight. The following information will help you check a potential tenant's income, including their employment status and average monthly wages.
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What kind of documentation can I request to check a prospective tenant's income?
You can ask the applicant about his employment status in person or on the rental application, but don't just take his word for it. To check their employment and income, you should request the following types of documents:
- Pay slips – Ask not only for the last one, but also for the last three months' payslips so you can create employment stability. Pay stubs should also list earnings since the beginning of the year.
- W2s – The tax documents show the person's total income for the previous year, which you can use to determine long-term employment stability.
What if the individual is self-employed or part of the gig economy?
If you work as a freelancer, consultant, independent contractor or run your own small business, you want to ask for various documents. These include:
- Bank statements – – The self-employed may not receive payslips, but their bank statements from the past few months show how much income they generate.
- 1099s – A 1099 form distributed to freelancers and contractors shows how much your potential tenant has been paid by a customer. Overall, these tax documents can give you an impression of your total income for the previous year.
Can I check income and employment status directly through the employer?
Yes. Pay slips and tax forms are backward-looking documents that may not provide an accurate picture of an applicant's current status. If you contact us directly, you can confirm that you are actually still working.
The best way to do this is to request a salary verification letter. This is a simple document from the applicant's employer, which usually confirms how long he has worked there, what he deserves and whether he remains an employee of good standing. Do a little research beforehand to make sure that the applicant hasn't provided any bogus information (e.g., if a friend pretends to be their employer). In this sense, it can also be helpful to request a business phone number or email address for employer contact.
In your request, make it clear that you perform a routine check of employment status and wages as part of the tenant screening process. Ask the employer to provide the following information about the applicant:
- Position / job title
- Date hired
- Salary or hourly wages and, if applicable, average commission or tip
- Is there an expected change in monthly income over the next 12 months?
- Ask if you should know anything else
Depending on the internal guidelines, the employer may request documents showing that you are entitled to receive the information requested. In this case, you may be required to provide a copy of the signed rental application or other information-sharing form that shows that you have the tenant's consent.
Can I request a review of employment instead by phone?
Yes. If you don't have a direct number, first ask the human resources department. You can also connect with the applicant's line manager. As with a written request, make sure that you rule out the possibility that the applicant may have provided a fake phone number by doing some research.
Would performing a credit check help me check an applicant's solvency?
It could. Conducting a background check (including a credit check) is always a good guideline when screening an applicant and can reveal potential money problems that are not related to their salary or employment. The most useful measure is the debt to income ratio, a measure of how much outstanding debt you have in relation to your income.
Protect your rental investment
Regardless of how beautiful they look when you show them the property, it is important that you get a full picture of potential tenants before you hand over the keys. A combination of application questions, background checks, and review of employment and wages will help you decide who best fits your rental, saving you time and money on eviction, property damage, or other problems later. Let Rocket Lawyer's extensive landlord resources guide you through the process and ask a lawyer if you have any further questions.