Verifying income on potential tenants who are retired

[Erich Oertel]

I have a rental property in Los Angeles, California, and it’s been on the rental market for less then a week.

Just recently, I showed the home to a retired couple that on face value, appear to be great candidates for potential tenants; however, part of my rental qualification is to show proof of income. The couple has informed me that they generate their income through rental properties. This is the first time I have rented to other investors (possibly).

To confirm their income is suitable and meet standers, would you review their bank statements or would you ask to review their 1099 from the rental property?

I just want to verify I’m renting to a legitimate couple who can afford the home.

Any and all information will be greatly appreciated.

[Randall Alan]

@Erich Oertel

I would simply repeat what you said the first time, "That's fine, just provide your proof of that income."  Fellow rental owners should totally "get it" and immediately understand your objectives.  

They could provide you their previous tax returns showing their income from the rentals... which would be better than bank statements from their business because it would be difficult to discern how much of that money they get to keep.  Tax returns should show you their net income after all the expenses from their business. 

If they come back and say, "Oh, it's all in cash" I would probably fall back on "If you can't provide me documented proof of income then I can't rent you the unit."  Or, alternatively, if they wanted to front multiple months of rent or a much larger security deposit, I could probably get comfortable with that as a small landlord.  It just depends on your comfort level.  If you have met them you can usually get a feel for people (to some degree)... so I would just weigh out. your thoughts... the less confident you are that they are 'solid' financially, the more you ask to get to a place where you are comfortable.  

On a similar line of thought... When potential renters  tell me they had an eviction, it isn't always a 'death sentence' to renting to them if they can explain it... but for me to be comfortable (1) it can't have just happened, and (2) I am going to ask for additional security deposit / last month's rent to the point that I feel like I am protected if I did decide to rent to them.  I think that's what it's all about.  No two situations are ever the same in those situations.  You have to decide first, if you are going to go with 'limited documentation'; and second - what is it going to take to make you comfortable. 

All the best!

Randy