As a landlord, you know that there is a lot of details that you’ve got to gather from your tenant if you bring on a new one. It can be enticing to skip proof of income. This is particularly true if you already run a complete credit check and confirmed their employment.
However, confirming their income is a vital step before you let them sign the contract. If you’ve got a home for rent San Mateo, here’s why you should ask for proof of income.
Figure Out if They Meet the 3x Income Rule
You aren’t simply confirming a stable income source when asking for proof of income. You are also determining if the prospective tenant can meet the 3x income rule. For those who don’t know, in general, you only want to take tenants if their gross annual income is 3x the rent you are charging.
You can obviously make exceptions to this rule. For instance, you can neglect this rule if the prospective tenant has a cosigner, a steady work history, or an excellent credit.
For a lot of prospective tenants, you simply have to look at a couple of pay stubs. However, you might have to look for other ways to confirm their income for those without your usual salaries job, students, and retirees.
Confirm The Income for Prospective Tenants Without a Traditional Salary
You have to confirm income for any tenant. However, this is particularly vital for a prospective tenant who does not have your usual 9-to-5. Here are a couple of things to consider:
Student tenants will usually have a cosigner. If this is the case for you, you will have to examine the proof of income for the cosigner as well.
There are other forms of income you can check for retirees. This includes pensions, retirement accounts, and social security.
Retail employees and sales representatives might be working through incentive plans or commissions. Though you perhaps request to see a couple of pay stubs for salaried tenants, you might want to check an annual income statement to figure out if a tenant that works on commission is making enough.
There will not be any paper trail for these kinds of tenants, just like self-employed. In addition to that, most of them do not know how to show proof of income. This makes it hard for them to look for a rental property. This group includes childcare workers, master crafts individuals, artists, yoga instructors, landscaping employees, waiters, and much more. However, you will most probably have to call or email their employer to confirm.
Renters who own their business will not have an employer to call or pay stub to show. You will have to look for other ways to confirm their income and guarantee that it is steady.
Keep in mind that you should not decline tenants immediately if they don’t meet your income criteria. There might be other ways to bring them on as renters if everything else checks out and they appear like an ideal fit.