What type of documentation may I request in order to verify a prospective tenant’s income?
You can ask the applicant about their employment status, either in person or on the Rental Application, but don’t simply take their word for it. In order to verify their employment and income, you’ll want to ask for the following types of documentation:
- Pay stubs – Don’t just ask for the last one, but ask for the last three months of pay stubs so you can establish employment stability. Pay stubs should also list the year-to-date earnings.
- W2s – Tax documents will show the individual’s total income for the previous year, which may help you determine their long-term employment stability.
What if the individual is self-employed or part of the gig economy?
If they work as a freelancer, consultant, independent contractor, or run their own small business, you’ll want to ask for different documents. These include:
- Bank statements – People who are self-employed may not receive pay stubs, but their bank statements from the past few months will show how much income they’re bringing in.
- 1099s – Distributed to freelancers and contractors, a 1099 Form will show how much your prospective tenant was paid by a client. In aggregate, these tax documents can give you a sense of their total earnings for the previous year.
Can I verify income and employment status directly through their employer?
Yes. Pay stubs and tax forms are backward-looking documents that may not provide an accurate picture of an applicant’s current status. Reaching out directly can help you confirm that they are still, in fact, gainfully employed.
The best way to do this is to request a Salary Verification Letter. This is a simple document from the applicant’s employer that typically confirms how long they’ve worked there, what they earn, and whether they remain an employee in good standing. Do a little research beforehand to ensure that the applicant has not provided fake information (e.g., having a friend pretend to be their employer). With that in mind, it also can be helpful to require a work phone number or work email address for the employer contact.
Be clear in your request that you’re doing a routine verification 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 of hire
- Salary or hourly wage, as well as average commission or tips, if applicable
- Whether there is an anticipated change in monthly income in the next 12 months
- Ask if there’s anything else you should know
Depending on their internal policies, the employer may require documentation that you are authorized to receive the information requested, in which case, you may need to provide a copy of the signed Rental Application or other information release form showing that you have the tenant’s approval.
Can I ask for employment verification over the phone instead?
Yes. If you don’t have a direct number, you may want to start by asking for the HR department. They may also connect you with the applicant’s direct supervisor. As with a written request, make sure you rule out the possibility that the applicant has provided a fake phone number by doing some research on your end.
Would running a credit check help me verify an applicant’s ability to pay?
It could. Running a background check (including a credit check) is always good policy when you’re screening an applicant and it can reveal potential money problems that are unrelated to their salary or employment. The most useful metric is their debt-to-income ratio, a measure of how much outstanding debt they have as a ratio of their income.
Protect your rental investment
No matter how nice they seem when you show them the property, it’s crucial that you get a complete picture of prospective tenants prior to handing over the keys. A combination of application questions, background checks, and verification of employment and wages will help you decide who’s the best fit for your rental, thus saving you the time and expense of eviction, property damage, or other problems later. Let Rocket Lawyer’s extensive resources for landlords guide you through the process, and ask a lawyer if you have additional questions.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.