Warning Signs of a Potential Problem Tenant : What About Self-Employment?
If you are a landlord or real estate agent, you know that checking a potential tenant’s bank, credit, background, landlord references, and employment information can help you determine whether that person would be a good rental prospect. If the potential renter has shown a history of paying his or her rent on time, that person would make a good tenant, right? Actually, there are other signs that could indicate a tenant who might not become a problem.
Everything else about the applicant appears to be okay so we sometimes ignore these warning signs. Many other times, we are in such a hurry to get the unit back on a paying basis, we go ahead and rent to the person anyway.
When your applicant begins to make a series of statements or excuses of why he or she cannot comply with your requests for information, you may have a potential problem renter. In these instances, you really need to explore further and to ask follow-up questions.
What About Self-Employment?
Although not necessarily a huge red flag, it is still something to be wary of. Many times if they are unemployed, or recently unemployed they will just say that they are self-employed. If a prospective tenant claims that they are self-employed you still need to verify income. There are many ways to do this. If they are independent contractors, you can ask for copies of their 1099s. If they are self-employed and have been for years, you can ask for the front page of their last two tax returns, this will show the gross income they are reporting to the IRS.
If you ask for that, and they state they are just recently self-employed, there are still ways to verify income. One of the best ways is to ask for copies of the last three months of bank statements, you can see what the deposits are and if they match what the income is. If you do go this route, make sure that the bank statement given matches the applicant’s name. If it is a company bank statement, get proof that they own the company.
Another way an applicant may try to fudge their income is stating that they work with their family members, and they pay them cash. If this is the case, ask for the family member to co-sign the lease, after all, if they work with them, and pay them, they should have no problems co-signing the lease since they are the ones who really know how much they make.
Ultimately, as a landlord or property manager, you won’t always know what type of tenants you will be dealing with until you’re in the leasing process. However, Instant Tenant Screening should give you an idea. Past behavior is a likely dictator of future behavior. Remember to always clearly state the expectations and outline the consequences of breaking the rules in the lease agreement. As it is a legally binding document, it can guide and protect most any situation you encounter.
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You may want to review some other warning signs of problem tenants as well, see what else you can do to address those issues: