One often used rental standard is an income requirement. Requiring a prospective tenant to show that they have adequate income is a smart way to qualify them. Using this standard requires landlords to learn how to confirm income. Because just being told something on your application does not make it true. How can you confirm income?
The Income Requirement Rental Standard
The actual rental standard can vary, but it is often stated as some multiple of the monthly rent. For example, a landlord may require qualified tenants to have three times the rental amount in income. Thus, if a rental unit is offered at $1,000 per month, a potential tenant would have to demonstrate $3,000 per month in income.
Why would a landlord have such a standard? An Income requirement standard helps to ensure that potential tenants can actually afford the rental unit and will pay the rent. Someone without adequate income might be forced into a decision of either paying rent, eating or keeping the heat on. We landlords want to avoid tenants having to make those decisions as the rent payment often gets placed on the back burner.
Income Has To Be Verifiable
Unfortunately, landlords should not just believe what potential tenants tell us. We have to confirm, or verify, what we are told because people lie. Prospective tenants also know that smarter landlords will try to verify their income. This fact can cause some of them to get pretty creative at deception. They might even be a professional at duping naive landlords.
Confirming And Verifying Income
The first thing you as the landlord should do is ask for a verifiable income amount on your application. Understand that income can be had from many different sources, such as a job, alimony, disability benefits or drug dealing. Three of these are verifiable, one is likely not. All can be faked however and those falsehoods are what we must uncover.
How?
If they have a job, one way is to call the employer. We definitely do that, but not in the way the tenant thinks we will. On our application, we ask for their employment contact information. We do not however use the contact phone number provided by the applicant. Instead we Google the employer and call the number that shows up on the search, then get directed to the person or department we need. In this way we bypass the “Vandalay Industries” trick. We have had more than one applicant try and use this technique in the past.
Secondly, look at the paper trail. Any verifiable source of income will have a paper trail These might be check stubs, bank statements, even tax returns could be used. But guess what? These can also be faked. There are websites out there that sell fake check stubs for example. The best way around that is to become a detective.
Legwork Pays Off
Most times after a little legwork on your part, things simply will not add up. Addresses will not match. Phone numbers will not be connected and dates will be off. When you find these inconsistencies, you need to ask for more information. If no clarity is provided, then you can reject the application, since income could not be confirmed.
This may seem like a lengthy process, and it can be. But it is quite worth it as you just may save yourself from an eviction later on.
Have a good story about a prospective tenant trying to fake their income? Please share with a comment.
Kevin Perk is the founder and publisher of Smarterlandlording.com. He is the author of Advice From Experience To New Real Estate Investors. Contact Kevin here.
