Why Proof of Income is Crucial
Part of a property manager’s job is advertising the community and getting people in the door. Whenever a new resident is brought in, you need to collect a fair amount of information from them, and sometimes it can be tempting to skip a few things during the process for the sake of time. However, this can prove to be a costly mistake in the future.
Income verification is part of the new resident process and an important step before entering into a new lease. Some may skip this step, especially if they have already received employment verification and a credit check. However, here are a few reasons you should never skip this step.
The Importance of Proof of Income
You have verified employment, and it is time to do the same with the potential new resident's income. This step prevents you from losing money and having to follow through with a costly eviction when the rent is not paid. Proof of a steady income reduces the risk to you and the new resident.
Three Times the Rent Income Rule
Many apartment communities ask that the potential new resident shows a stable income source covering three times the rent amount. This is commonly known as the 3x income rule. However, there can always be exceptions to this rule, like if the resident has good credit, consistent work history, or a co-signer.
The Bureau of Labor Statistics estimates that 10 percent of the population in the US has had alternate work arrangements. Some also supplement their income with side jobs in the gig economy. Sometimes, it can be harder to prove this kind of income.
How to Verify Income
There are many ways you can verify income as a property manager. It can be as simple as requesting pay stubs and an employment verification letter that provides a clear picture of the potential resident's finances. You can also request a W2 or 1099, a tax return from the previous year, or retirement, social security, or pension distribution statements.
What If the Income Criteria Isn’t Met?
If you have a strict rental income requirement that has not been met, this doesn’t necessarily mean the potential resident is out of luck regarding your community. See if everything else checks out aside from the income verification. If they have everything we mentioned above and seem like a good fit for the community, you shouldn’t decline immediately.
Consider all their income means, especially if they are a retiree. Collect statements for retirement accounts and if they are a salaried employee, also consider any side gigs they take on for extra money.
For more tips and advice on improving occupancy while avoiding costly new resident mistakes, contact Occupancy Solutions, LLC.