Most rental applications will ask for salary and annual income, which can be straightforward for someone with a traditional paystub to prove. But if you’re looking for a way to prove income for your rental applicants with non-traditional income sources or gig work invoice payments, the Income Verification Report can be one of your most valuable tenant screening reports. An Income Verification Report will analyze your rental applicant’s financial records to provide you with information on total income so you can feel confident making a housing decision.
How to Verify Income on your Rental Applicants
Want to succeed as a landlord, build strong tenant relationships, and make informed rental decisions? It all starts with tenant screening! In this video, Kaycee Miller from Rentec Direct breaks down one of the most valuable screening tools for landlords: the Income Verification Report.
What You’ll Learn:
- Why tenant screening is crucial for landlords
- What an Income Verification Report is and how it works
- How income verification helps you assess rental applicants fairly and accurately
- The benefits of using PayScore with Rentec Direct to verify income
- How to stack income verification with credit, eviction, and criminal reports for a complete screening process
How to (Actually) Verify Income in Tenant Screening – Watch the Video
How to (Actually) Verify Income in Tenant Screening – Video Transcript
What’s the number one piece of advice I give people if they want to be as successful at real estate investing, have a positive landlord-tenant relationship, and actually enjoy being a landlord?
It is prioritizing tenant screening. Tenant screening is the best thing, I believe, a landlord can do in order to have a positive experience in rental management.
Now, I’ve talked a lot about tenant screening. I’ve gone over the main reports that you might want to run on a rental applicant, their benefits and their differences. These top tenant screening reports include a credit report, criminal history, and an eviction history report.
And today, I want to talk about another one of my favorite reports that is really valuable to a landlord who wants to verify income for their rental applicant.
And that, is the income verification report as part of your tenant screening package.
Now, I use a company called PayScore. It’s integrated with Rentec Direct. It is a really simple process in order to find out what types of income your rental applicant has to ensure that they’re going to be able to afford living at your property.
My name is Kaycee Miller. I work for Rentec Direct property management software. I’m also a landlord, a real estate developer, and a real estate investor.
I’ve also been writing about landlord-related topics for over a decade on the Rentec Direct Blog.
And today we’re going to talk about the income verification report in your tenant screening package.
What is an Income Verification Report?
It makes sense when you are doing a background screening check on your rental applicant that you would want to find out what their sources of income are or how they’re going to pay their rent each month.
Now, in some states, you might not be able to make a decision on the income source, like if an applicant receives child support, you might not be able to make a judgment on whether that counts as income.
So, a lot of states actually have rules that protect people who receive certain types of income or payments. So a landlord can’t make a housing decision based on that source of income.
A landlord can make a decision on the amount of income a rental applicant has and if that will qualify them to meet the minimum acceptable rental criteria.
Verify Total Income for your Rental Applicants
The next question you could have when analyzing the applicant’s income amount is figuring out how to prove your applicant has as much income as they claim on their rental application. Sure, you can ask for pay stubs, copies of checks, tax forms, 1099s, or 1040 tax forms.
But one of the easiest things to use is an income verification report.
An income verification report connects directly to a rental applicant’s bank account through a secure connection via Plaid. And the automation of that income verification platform will analyze someone’s bank account and determine how much and how often your applicant receives deposits or payments that could count as income.
The income verification report can see a direct deposit coming in, but also, if someone actually deposits a paycheck manually every month.
Your applicant can also prove they get non-traditional deposits, like a distribution from a trust, a child support payment, alimony, or a lump sum from a student loan or scholarship distribution.
The Power of an Income Verification Report
The income verification program actually analyzes all this information and gives you a report that makes it easy to determine an applicant’s total income and ability to meet the income requirements for your property.
An income verification report can show:
- Monthly recurring payments
- Non-recurring payments throughout the year
- A 12-month average of their monthly income
- A three-month average of their monthly income
You will also find information on your applicant’s savings and checking account. Your applicant can provide explanations within their report, for example, they could say, “These three Venmo payments were from a freelance job that I did.”
If you think about the types of work, gig work out there—beauty services, freelance art services, landscaping services—a lot of those service providers get paid through non-traditional payment forms, especially as a self-employed service provider. So they might receive Venmo payments that aren’t the same every month, aren’t recurring and don’t necessarily have a receipt attached to them. But an income verification report will give you a picture of an applicant’s total income.
When you see them all analyzed and stacked together in a report, then that can give you more confidence as a landlord or a property manager that “yes, this tenant does have verifiable income and they actually are going to hit my threshold of, let’s say, three times the rent that you’re charging.”
Making an Informed Tenant Screening Decision
The income verification report is a report that I like to stack on top of some of my other tenant screening reports.
We can pull credit history to see what someone’s debt-to-income ratio is, but then also use that income verification report to say:
- Based on this income verification report, I know that they get routine payments
- They get quarterly payments of this amount
- They’re going to be able to meet their debt obligations that I see on a credit report
- They’re also going to be able to meet their rent obligation
And let’s use the criminal history report too, to see that they are not convicted of a violent crime that would indicate that they aren’t responsible enough to maintain and uphold that rental contract that you have.
So, with every tenant screening report, I really like to think about how I can use this to make an informed screening decision.
The income verification report is great because all the data is aggregated together, and makes it really simple to make a decision. Versus if you’re not using a service like this, you may ask for pay stubs, invoices, and tax records. That sounds like a lot of work when you could just look at an aggregate number that really gives you the confidence to make an informed screening decision.
Final Thoughts
So income verification, eviction history report, criminal history, credit report—those are some of my top tenant screening reports that I really recommend that all landlords and property managers understand and utilize in order to make an informed housing decision and give yourself the opportunity to have the most positive experience in managing rental housing.
My name is Kaycee Miller. I work for Rentec Direct Property Management Software.
I’m always here to give you lots of helpful advice on what it’s like to be a landlord, the best way to maintain a relationship with your tenants, and how to be a great property manager.
Come and visit me on the Rentec Direct blog, and stay tuned for more videos.