As a landlord, you want to ensure that your tenants are able to pay their rent. You want to do a thorough screening to ensure you aren’t creating a risky and troubling situation. To do this, you want to gather the proper documentation including an income verification letter to ensure that your renters can pay for the monthly rent and you aren’t causing yourself an unnecessary headache.
When renting out your properties, you want to ensure all paperwork is in the proper order to protect yourself and your properties. This means that all potential tenants should fill out various pieces of paperwork and provide certain documents when applying for each rental. A few documents that you should always include in the application process are:
- A paper application with contact information and a rental history
- Two forms of income verification
- Photo identification
- Social security numbers. Many individuals may be hesitant to provide this information but it is necessary if you plan to do a thorough background check
- A full list of references
Many applicants may struggle to provide you with the correct income verification letter needed. Luckily, there are several options available that will verify the potential renter’s income and help you determine if an individual can truly afford to live on the property. Here are several types of income verification letters that you should be familiar with when renting out your properties.
1. Pay stubs
One common income verification letter that you may receive from potential tenants are pay stubs. This one document will provide a rich history on the individual including their full contact information, how often they receive a paycheck, how much they’ve received since the beginning of the year, and if the individual receives a commission, bonuses, etc.
Because this document provides such a substantial amount of information on an individual, it may be the most important income verification letter that you request. You may also want a second source of documentation, however.
2. Letter from the tenant’s employer
Some individuals may be starting a new job, particularly those who are just starting a career after finishing their schooling. This letter may state many specifics such as the type of work the tenant will be completing, their income, how often they will be paid, if the position is long or short-term, etc. Additionally, if the individual has been working for the company for some time, it can also act as a type of reference letter, giving you more confidence in your decision.
Keep in mind that if you choose to accept letters from employers, that the letter is professional and not forged. Only accept the letter if it is on company letterhead, has a real signature, and contact information that you can reach out to the employer for further questions.
Many applicants may consider phone verification from an employer enough. Keep in mind that this doesn’t provide you with a written history or the proper income verification letter that you need to avoid a risky situation later on.
3. Tax returns and other tax forms
As you look for tenants, it is important that you consider their employment history. While one individual could currently be making a lot of money, it may be a short-term position and not the norm. Ideally, you want to look over the potential renter’s employment history for the past two years. One way to do this is by using tax returns. This provides all the information that you would find on W2s and pay stubs. Look through these documents carefully for any discrepancies or inconsistencies.
If full tax returns are not provided or available, tax forms such as W2s and 1099s can provide much of this information that you desire. Make sure you are in constant communication with an applicant to ensure they understand exactly what type of tax documents and forms you need.
4. Bank statements
You may come across many potential renters who are self-employed. While these individuals have an income coming in every month, it can be difficult to prove it. One income verification letter that could prove beneficial is a bank statement. This one document can show certain deposits from the individual’s business and how much money they have available to pay for rent and other expenses. If possible, ask potential tenants for at least three month’s history.
Once you have approved the application, request the deposit for the application as soon as possible and have the applicant sign the lease. If the potential tenants cannot provide this money to you right away, it may be in your best interest to continue looking for renters.
If finding potential tenants and ensuring you have all proper paperwork needed seems overwhelming, consider partnering with companies like Blueground. We create a seamless partnership to ensure the entire rental process is streamlined and efficient. We take care of all the vetting and verification to ensure only reputable and cash solvent tenants are living in your space.
The Landlord Resources blog is Blueground’s information hub for landlords and property owners.
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