Too strict on Income Verification for screening process?

Question

Hi all,

Wanted to get opinions on if the screening process I did was too intensive and made me lose out on a potential tenant.

Stats: SFH, 4/2, good condition home, in good neighborhood right next to university, about 1600 sqft

Potential tenant was a grad student moving to the area due to new job with income (verified) but not enough for 3x rent; tenant's mother was also an applicant - offered a job but was not able to provide proof of income.

Both underwent credit and background check with no major credit problems.

I asked for bank statements to make sure they had enough cash reserve but they did not want to provide it. Wondered if the screening process was too strict.

Thanks in advance for your input!

Marrio Barnes · Answer

Never apologize for protecting you're interests. If you rent to them you will be kicking youself when they start paying late on the 2nd month.

Redouble your marketing efforts and contact the nearby university. They should have good connections to help you find more applicants.

Good luck.

Dustin N. · Answer

Hi Bill,

When I was renting in MA and NYC I had to hand over all my bank statements, tax filing, employment contract and pay stubs for the application process. Thought it was more of the norm to do so.

Not sure if there is any specific service that does all of that. We did use transunion smartmove which gives a random tenant score that I cant really decipher and I don't really trust (not only that but they have no support to call for help with these reports).

Andrea Collatz · Answer

Hi @Dustin N.

I'm a representative with TransUnion SmartMove. We'd be happy to help with any questions you have about an applicant's score, just send me a note through Bigger Pockets. Thanks!

Tom Ott · Answer

Well do the math on that one. If you feel they cannot afford the unit then you must tell them that. Always do a DTI to see what they can afford for rent.

Bill Bell · Answer

Indeed, if a tenant provides any PII info, just be sure anything like account numbers, SSN, or other identity data is obfuscated before you as landlord will accept it.  Otherwise, as a data holder, via landlord business, you now become responsible for PII data which can open risk to identify theft liability or other issues related to handling PII sensitive data.

Dustin N. · Answer

The application was for a 2600/month studio rental in manhattan with my meager salary of 71k a year, lol.

Tom Ott · Answer

Depending on the company, bank statements and tax filings are not always required. If someone is self-employed they are most likely used to having to hand in those documents. That is probably the best way to verify income since they would not have normal pay-stubs like everyone else. Most of those documents do not have information that can be harmful. If you print a bank statement from the website they star (*) out any information that can be harmful.

Bill Bell · Answer

I don't know... handling bank statements of tenant prospects as a landlord can open some unwanted doors.  Once u begin acquiring bank statements and/or other Personally Identifiable Information (PII), it can open issues which may come back to haunt (if hit by a savvy tenant prospect).  I guess as long as the statements show only the person's name and history with no identifying bank account info, you may be ok.  However, i understand the reservation for tenant prospects to simply provide their bank statements to a landlord.  Likely best to use a third party screening service as compared to handling income review yourself.

Tom Ott · Answer

Hi Dustin,

Great questions! First thing we do is have them sign an authorization form, which allows us to look up their credit report and do a background check. Never simply look at a credit SCORE, but make sure you look at the whole REPORT. Someone could have a good score, but owe a lot of money on collections. (I know, but it happens)

Analyze their credit report and if you feel comfortable, do a background check and make sure their criminal history checks out.

Another key factor is employment history. Make sure they have a job of course! You also want to make sure they have had the job for more than a few days. Remember their ability to keep their job (or have a steady income) will directly effect their ability to pay the rent.

We always have them submit pay-stubs. 2 - 3 most recently ones give us the information we need. You want to use that information to check to make sure they have enough money to pay their bills, including the rent. We don't normally ask for a license until they are signing documents, but that might be different depending on your state.

I understand you wanting to be strict, the last thing you want is a terrible tenant who cannot pay the rent. Make sure they can pay their bills including the rent, have a good background, have been good tenants before, and don't have poor credit. Those are the major aspects, everything else is case by case.

Please let me know if you have any questions!

Jeff B. · Answer

If they can't document, the BIG BELL red flag should be waving!  Rational decision making is NEVER too strict!  good job :)

Too strict on Income Verification for screening process?

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