How do I verify a tenant that is Self-Employed?

Question

I am looking to fill my first rental! I have a potential tenant that has been self-employed for the past few years. She claims $4,000 monthly income. How would I verify that? Am I allowed to ask for tax returns, bank statements, etc.?

She just sold her home that she owned a few months ago, so any thoughts on verifying residential history on clients that are new to renting would be great as well!

Thanks!

Thomas S. · Answer

Yes you can and should ask for several years of tax returns. If she sold her home it was likely due to financial problems. Self employed applicants really have no guaranteed income and it can fluctuate wildly over time. They also often have bad credit scores if they are bad at managing a business. Your screening should find out everything you need to know.

I personally will not rent to anyone self employed. Their landlord will be the first to go unpaid and they will constantly ask to pay late so they can pay creditors first.

They are high risk and should be avoided, pass them on to a less qualified landlord.

Account Closed · Answer

LOL! You realize most landlords, and I'm guessing probably you yourself, are considered self employed, right? Personally, I've never had a "real" job in my life. I've been running my own businesses since I was 12. I've never been given a dollar but now I have plenty of them to spend along with a perfect credit score.

If somebody can be self employed and prove they are making income, I consider that to be much more of an accomplishment than somebody who just works for someone else.

Josiah Pisel · Answer

Occasionally you will get people who are 1099, retired, trust funders... I would get previous tax returns, a couple of months bank statements, previous employment references what ever it would take for you to feel comfortable.

In addition to doing income/employment verification also get previous rental history (this may not apply to this particular person), credit checks (can also help if income is hard to verify), personal reference, pet reference (if applicable), criminal background checks

You may also be able to charge first months rent, security deposit, and last months rent (for more security if your worried about there ability to pay)

I found that going through the whole application and talking with references, checking credit, criminal background you tend to get a "feel" for how the person would be as a renter. Some applicants are no brainers and others you end up wavering a bit. If the market was such that there wasn't many people looking I would charge a last months rent for that person I was wavering on. And then keep an eye on them, make sure rent is always on time, and do regular checks on the unit to make sure there is no damage. After a couple of months you'll become more comfortable (hopefully).

Simon Ghandil · Answer

While I agree with Thomas S. about screening and learning everything about a self-employed tenant, I don't think you should not rent to someone because they aren't self employed.

I've been self employed since I was 18, and finding a place to rent was one of the most difficult obstacles I had to hurdle. Now knowing that I could afford rent, I would be willing to show everything such as bank statements, checks, references, anything that would show that I am financially capable of paying rent.

Now if there is a red flag, or if the tenant feels uncomfortable with your screening process, then I wouldn't hesitate to move on to the next.

Account Closed · Answer

Once you have proven income, say 2 years of tax returns, and a good credit score, then "statistically" the risk is not any different whether self employed or paid monkey.

I do agree it can be harder for a self employed person to prove certain things. If they cannot, then yes they are a bigger risk.

Account Closed · Answer

You have absolutely no evidence that shows a self employed person who can prove enough income is a higher risk. Most people on this website are considered self employed, and the fact that they are here in the first place says they are more sophisticated than the average paid monkey on the assembly line.

The fact that they are self employed means they can't be fired or "let go", if they have maintained income for the past 2 years there is no reason to think they couldn't continue to do so. I would consider a self employed applicant to be more qualified.

Bill Hamilton · Answer

to each their own.....but this site is dedicated to people who are, or want to be self-employed. Not trying to twist anyone's tail but it almost seems hypocritical to want to make the majority of our money through self employment but then indicate that others who do the same are unworthy as renters or tenants.

Rosston Smith · Answer

I wouldn't. Id just pass.

Shawn Ackerman · Answer

@Brad Crosby I'll definitely do tax returns and bank statements to make sure she is legit.  Good Luck!

How do I verify a tenant that is Self-Employed?

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