When you're deciding on whether or not to rent to a prospective tenant, you want to make sure that you're getting the best possible candidate who will pay the rent on time and keep the property damage-free. One important aspect of this decision-making process is verifying their income, which can be done by checking their paycheck stubs or another form of documentation. This guide will show you what documents will verify employment and help ensure that your applicant's income qualifies them to live in your rental property.
The Basic Documents Everyone Needs
To verify a tenant's income, you'll need to request some documentation from them. The most basic form of documentation is a pay stub or other proof of income. If the tenant is self-employed, you'll need additional documentation, such as tax returns or bank statements. The best way to verify a tenant's income is to request all relevant documentation and then follow up with a phone call to the employer (if applicable).
Important Things to Consider When Collecting Documentation
When you're verifying a tenant's income, you'll want to make sure that you collect all the necessary documentation. This includes things like pay stubs, tax returns, and bank statements. Additionally, you'll want to make sure that the documentation is from a reliable source. For example, an employer-issued pay stub is going to be more reliable than a bank statement. Finally, you'll want to make sure that the documentation is up-to-date.
W-2 Forms
One of the most common forms of income verification is the W-2 form. This form is issued by an employer and reports an employee's annual wages and taxes withheld. The W-2 form can be used to verify both current and past employment.
Pay Stubs
If your tenant is employed, their employer should be able to provide you with documentation verifying their income. The most common form of documentation is a pay stub. Pay stubs will show you the tenant's gross income, as well as any deductions that have been taken out. This information can be used to verify that the tenant is able to afford the rent.
Yearly Bonus or Profit Sharing Statements
If your tenant receives a yearly bonus or profit sharing from their employer, you'll need to request statements for the past two years in order to verify their income. These statements will show how much money the tenant has received in bonuses or profit sharing and will help you determine if they can afford the rent.
Bonus Checks, Commissions, Raises, Tips
Bonus checks, commissions, and raises can also be used to verify income. If the tenant is self-employed, you'll need to request tax returns or bank statements. Tips can be verified through credit card statements or bank records.
1099 Forms For Freelancers And Contractors (U.S. Only)
If you're renting to a freelancer or contractor, they may not have a traditional W-2 form. Instead, they should have a 1099 form that reports their annual income. You can use this form to verify their income and make sure they'll be able to afford the rent.
Additional Information Regarding Self-Employment Income
If the tenant is self-employed, you'll need to obtain a copy of their most recent tax return as well as bank statements or other financial documents that show their income. You should also require the tenant to provide a list of references who can attest to their character and business dealings. As with any tenant, be sure to run a credit check to determine if they're likely to pay rent on time and in full.
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