As layoff announcements ramp up and unemployment numbers soar to levels not seen since the Great Depression, responsible property managers need to examine how best to gain insight into the income stability of both applicants and tenants.
With the impact from this global pandemic, more renters than ever are in tenuous spots today.
Strategic landlords are seeking the best information they can get their hands on these days when making decisions about their rental business. One of the safest ways to protect a rental property involves thorough tenant screening to find a qualified applicant who can uphold the lease terms and pay rent.
When following legal tenant screening processes, one looks at an applicant’s financial responsibility as seen on a credit report and verifies income to ensure rent obligations can be met.
It’s no wonder, when uncertainty increases, we all reach for concrete answers. And even under normal circumstances, it can be a challenge for landlords to work with tenants who are on shaky financial ground.
Income Verification During Tenant Screening
The traditional route of collecting pay stubs and bank statements, on the surface, is the historic go-to practice-one landlords continue to rely on.
However, my position is that the old approach is not the best approach. Why? Because it’s so easy to generate fake pay stubs and bank statements online these days (on average, it takes ~4 minutes), that you just can’t be sure what you are seeing is useful or valid info.
Even before the virus took hold, one in five applications included stated income that has been inflated and one in 12 applications included false income information.
Landlords need to get over this hurdle and move into the future with automated and independently verified income. As you may have seen, Rentec Direct offers all clients a feature to automate income verification, which draws on actual data from the bank account of your applicant or existing tenant. This service (powered by The Closing Docs) reveals up-to-the-minute income and there is no opportunity to manipulate the data shown in the income verification report.
It also eliminates any guesswork regarding whether someone has the capacity to pay rent going forward.
When to Run an Income Verification Report
When is the right time to originate requests for automated income verification?
New applicants
In the case of new applicants, you need to validate whether they can meet the monthly rent obligation.
Prior to renewing existing tenants
The same goes for existing tenants. Job statuses and other income sources can change. Before signing tenants up for another lease term, it’s wise to verify they are currently receiving income deposits.
When existing tenants come to you for rent relief
When tenants ask for rent relief due to changes in employment status, there is no better way to determine the extent of their hardship than reviewing up-to-the-minute deposit history. That info will support discussing potential terms with owners, providing current data to defend any position.
Eliminate Dishonest Rental Applicants
As an additional benefit, our clients tell us that applicants are opting out of the application process once they arrive at the request for independent income verification.
This stage is a moment of truth; when the applicant learns their income is going to be independently verified, they conduct a point analysis and determine whether to proceed.
What does this mean for you? Well, you’ll no longer spend time screening an applicant who ultimately isn’t going to win approval. That time saved costs you nothing, but gives you extra minutes, hours, or days that will shorten marketing time, or free you up to go hunt new accounts to manage.
Now more than ever, automated income verification is the right approach to gain confidence, increase accuracy, expedite approval, and protect your rental properties.