The information on a standard rental application is entirely supplied by the applicant. That means you cannot afford to take everything at face value. For example, if an applicant claims they earn $15,000/month in income, it is your responsibility to ensure accuracy.
You may not imagine your applicant would ever lie purposefully. But according to a research study done by Forrester and commissioned by TransUnion: Out of the 153 property management organizations included in the study, it was found that 73% of their property managers did not find evidence of fraud until after a tenant moved in.
For this reason, you can’t take shortcuts in vetting rental applicants. Making decisions based on accurate information can drastically reduce the odds of renting to a problem tenant.
There are five key categories to verify on a standard rental application:
1. Identity
Is your applicant who they say they are? On a rental application, identity is one of the most important things that you can verify. When reviewing applications, you must realize that there will be people who will lie about their personal information. If you overlook an applicant’s details, you run the risk of missing a potentially dangerous applicant.
In today’s technologically advanced world, it’s possible to fake everything from SSN cards to passports. Applicants who are willing to go to such lengths to lie will have no problem being dishonest in the future and are likely to hide important information from you.
When looking through applicants, it’s likely that you will run into people who lie about their personal information. It is because of this that you need to vet your applicants thoroughly.
There are a few different ways that you can check, for an applicant’s identity. One of the first things to check for is government issued identification.
Most applicants have government IDs in the form of:
- A state-issued driver’s license
- A valid passport
- An international or travel visa
Another common way to check for identification is from an SSN card. An applicant can choose to provide their social security number on a standard rental application or can provide you with a copy of their card.
RentSpree automatically includes an identity verification step for each applicant who submits screening reports by requiring correct answers to questions relating to the applicant’s history.
2. Employment
In many situations, applicants are required to provide employment information on a standard rental application. It is also your responsibility to verify whether the information provided is legitimate. Is an applicant truly employed? In many cases, when an applicant is lying about their employer, they are also likely to lie about their income.
When you are reviewing applications, one the defining factors you should be looking out for is if their job can support the rent price. If the applicant refuses to supply you proof, you may consider moving on to another applicant. Denying you proper information is a major red flag.
When applicants fill out their standard rental applications, this will usually include contact information for employers.
There are three ways you can go about verifying employment:
- Contact listed employers. Using the contact information provided in the employment section, you can reach out to employers over the phone to verify that the listed information is accurate. If the applicant does not provide sufficient contact information or you cannot get in to contact with the employer after repeated attempts, be sure you take this up with the applicant or use another method to verify employment.
- Request documents. The other method to verify employment is to request supplemental documents from the applicant. Depending on how the applicant is employed, you may request different documents. For example, self-employed applicants may not have pay stubs so you might ask for tax return instead to prove employment.
- Check screening reports. Many screening reports include an employment search that you can use to cross-reference with the employers listed on the rental application.
3. Income
Dealing with rental payments can be a pain but failing to verify an applicant’s income is a surefire way to welcome problems later on. According to TransUnion, the number one problem that landlords face is payment problems. When renters start missing their payments, it’s more of a burden for you to evict a tenant. The high cost of eviction is not worth it. Averaging at $3,500 or more, an eviction is just not worth the time and money.
When reviewing applications, one of the defining factors when accepting or denying applicants is if they can afford the rent price. Watch out for suspicious information. If something seems out of place, don’t feel pressured to investigate. When necessary, ask for documentation to that can prove an applicant’s income.
After all, you want to verify is if an applicant can afford your rent. You can avoid the stress of eviction and missing payments if you correctly verify an applicant’s income. Narrowing down to only applicants who can afford the rent can help secure long-term stability.
Documentation that can help to verify an applicant’s income:
- Pay stubs
- W-2 tax forms
- W-4 forms
- Bank statements
- Employment contracts
- Court-ordered agreements
How much income is appropriate for the rental property? It depends on how much the rent is. That’s why people commonly use a rent-to-income ratio for applicants instead of using a set income. This is because the amount of income required to cover rent increases if your property is more expensive to rent. A common ratio is three-to-one, but it can vary considerably depending on what you are looking for.
For example, using the three-to-one ratio: If the rent price of the apartment is $2,500/mo., then you should be expected that an applicant is making $7,500/mo., or more.
4. Residence History
On standard rental applications, you can find information about an applicant’s residence history. Verify past tenancies and contact any current or past landlords to learn more about an applicant.
When looking through an applicant’s residence history, there are a few things you should verify:
- Contact the applicant’s current and previous landlords. A good way to weed out fake landlord references is to ask questions that are specific that only the applicant’s “real” landlord would know. Some good questions are: What was the address of the property that the applicant rented from you? What was the applicant’s monthly rent amount? What dates did the applicant reside at the property?
- Run an eviction report on the applicant. You can also cross-reference this with the application. Review if there were any evictions that the applicant has not mentioned. Ask your applicant about any missing evictions and if they refuse to give you any information, you may want to move onto another candidate.
- Make sure an application has a clear chain of history. Whenever you find that an applicant has an unaccounted gap between residence histories, it should be investigated. When they refuse to provide you with that information, you may rethink moving forward to the lease.
Knowing how an applicant behaved in the past can grant you insight into how an applicant might act with you. Verifying residence history will let you know if an applicant can make rent from month to month, or how they will treat a rental property.
Keep an eye on any red flags when looking into an applicant’s residence history. An unfavorable applicant will leave out eviction histories or lie about their landlord references. When this happens, it may be in your best interest to reject the applicant and move on to another.
5. References
When applicants give contact references, you verify them by calling or emailing them. Verifying is important to learn if an applicant is either hiding something or lying to you. With employer references, verification can mean the difference of knowing if an applicant is truly working or not.
Watch out for candidates who give out false references. These days, rental applicants will go the extra mile to pay for someone to pose as a reference to get a good word in. Because of this, be mindful of the questions you ask and carefully weed out the liars from the truthtellers.
Depending on the standard rental application you use, an applicant will be required to provide references. From employers to family members, contacting these references will give you a clear understanding of an applicant’s behavior.
References are people too! When speaking with a reference, many of them are inclined to give their own opinion about an applicant. In this case, try your best to steer the conversation to only facts about the applicant. Fact-based questions can be things like, how much they were paying in a previous tenancy.
When an applicant is hesitant to give contact references or have any objections to contacting references, you know that they are hiding something. If this is the case, you can choose to investigate it further, or strongly consider moving on to another candidate.
Closing
Fraud is one of the most common things a property manager can encounter. When vetting an applicant, you need to thoroughly investigate all suspicious information and cross-reference all the information you receive. Taking shortcuts here can cost you thousands of dollars. The last thing you want is a costly eviction for a poorly vetted tenant.
