Help with out-of-area renters

[Wei Xie]

After listing my rental 2500sqft SFR for a few days, I got an inquiry today from a couple who plan to move into my area. They lived here before and want to move back and settle. They viewed the photos online and said they liked the house very much and wanted to proceed with application. They cannot fly in town to view the house before the actual move but suggested that they have a close friend here who may help. My questions are that 1. Is it natural for people out-of-town to skip house seeing and commit to a lease? I feel better as they lived in this town before but the whole situation still makes me little uneasy. I did a google search and found their business website, which seems legit. In general, what do you do with such kind of applicants? Any extra precautions that landlords should heed in addition to the standard tenant screening? 2. One of the spouses is self-employed. How do you deal with this situation and what are a good criteria to ensure income stability? Thank you all in advance! Wei

[Chris Mason]

Originally posted by @Wei Xie:

2. One of the spouses is self-employed. How do you deal with this situation and what are a good criteria to ensure income stability?

If you want to do something similar to the mortgage industry, ask for the most recent two years of tax returns. Turn to Schedule C (if they show the income on Schedule C, not all do depending on the business). Take the line 31 number, add the line 13 number by it. Divide by 12. There's your ballpark monthly income. 

Do that for 2014 and 2015. If 2015 was greater than 2014, take the average of both. If 2015 was less than 2014, don't do an average and just use the 2015 number divided by 12.

If they claim they are having an amazing year so far, set to be the best year in the history of the universe, look at all these business plans, etc, and you again want to do what the mortgage industry would do... tell them "Awesome! Please apply again once you have filed your 2016 taxes."

The thinking in the mortgage industry is that if you didn't pay taxes on it, it isn't real. Simultaneously, no one is going to declare income and pay taxes on it, if it isn't real, but all sorts of people might make up all sorts of boastful income claims ...if they don't have to pay taxes on it. So our industry does a "gotcha!" thing by completely ignoring the income until it's on two years of tax returns.