Every Landlord is aware of the volume of information you need to collect from new tenants. Often proof of income can be forgotten particularly when you have already confirmed their employment and run the appropriate checks. Here’s why you should always look for proof of income and what to do if your new tenant cannot prove a traditional source of income.
You Need Proof of Income
No one becomes a landlord to lose money. Likewise no one becomes a landlord just to have to evict people. Having a solid proof of income, which is in line with the rent you charge, reduces the risk of losing money due to costly evictions. It also ensures the tenant can afford their rent and not end up having to move out before their contract runs out.
Rise of the Gig Economy
An unwritten rule for landlords is generally to only take on tenants if their gross annual salary is at least 3 times the rent you intend to charge. The rise of the gig economy has presented a new challenge for landlords, as about 10-15 percent of the population have “other work arrangements”.
Examples of some of these situations include:
Self-Employed: Potential tenants who own their own business may have no references regarding employment. Bank statements can provide evidence of stable income in this situation.
Cash-Only employees: On rare occasions tenants may be getting paid in cash. This could be very regular and stable but no paper trail or bank statements can be provided. Tread cautiously here but remember an employer can always be contacted in this situation for reference.
Recently Retired: Retirees will have other types of income you can check such as state and personal pensions.
Students: Many students will be relying on only part time work & student grants or loans, making it difficult to gather all the information required.
Methods of Proof of Income
As a registered landlord you are permitted to request the following of your potential tenants:
– PPS No. (this is required for the registration of the tenancy with the Residential Tenancies Board) (www.rtb.ie)
– A reference from your previous landlord
– A reference from your current employer
– Photo I.D. such as a driving licence or passport
– Evidence of residency
– Recent bank statements
– Payslips
Using these documents you should be able to establish with some degree of certainty the risk or non-risk of progressing with the rental. Proof of income is very important in protecting all parties involved. Use all the data available to you and make a well-informed decision in the best interests of both parties.
Professional Advice
You should always seek professional advice before committing to any agreements with tenants. If you require professional services from a property management company, then please don’t hesitate to contact KPM Group today and a member of staff will be happy to assist you in any way we can.
