As a landlord, you know the importance of ordering a credit report and background screening to vet a potential tenant. The credit report will show you how the applicant spends their money and whether they pay their bills on time each month. But a credit report does not show you where that money comes from. You can see the “outgo” but not the income. A DOZEN WAYS TO CONFIRM AN APPLICANT’S INCOME The list below describes 12 ways that a potential tenant can demonstrate proof of income. Only then can you know whether they are able to pay the agreed-upon rent for your income property. PAY STUBS The most often requested proof of income is the pay stub. If the applicant receives their wages in the form of a paper check, an accounting of their gross and net pay should be attached to it. If they are paid by direct deposit, a copy of the stub should be available on their company portal or in paper form from their employer. If they are paid through a third-party payroll processor, such as ADP, the stub will be on the processor’s portal. It is recommended that you request pay stubs for at least the prior two months. Take note of whether their income is high enough to pay their expenses and the cost of your rent. BANK STATEMENTS Bank statements are another excellent method of determining how much cash the applicant is receiving and how much they are spending each month. In addition, they can also be used to ascertain income for someone whose wages are commission only or who is self-employed. Applicants are usually asked to provide bank statements for at least the last two months depending upon their employment status. FORM W-2 INCOME STATEMENT An IRS form that employers must send to an employee and the IRS every year, Form W-2 reports a worker’s annual wages and the taxes that were withheld from them. It is used to verify income for tax purposes but since it is for the previous year, it does not give any current information. It does, however, provide the name of the applicant’s employer during that time and how much they were being paid.
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