Self-employed renters naturally strike fear in a landlord’s heart. Sure, we admire their moxie. But what about paying the rent? What about the ebbs and flows of business? How can you be sure a dip in sales won’t leave them weeks or months behind on paying up?
The same goes for freelancers, gig workers, and all those other professionals without standard, 9-to-5 jobs. They’re worrisome.
Fortunately, you don’t have to take a leap of faith when these tenants come calling to your rental property. There are many ways to both evaluate a self-employed renter’s income and ensure they’re a good fit for your rental all in one fell swoop. Here are five of them.
1. Ask questions
Get to know the prospective tenant. Ask them about the nature of their business, how long they’ve been operating, what types of clients they work with, and more.
You should also find out about the tenant’s credentials, past employment, and education history. How qualified are they to be doing what they’re doing? How likely is it they have the connections and skills to keep their business afloat?
2. Research the business
You should also research the business. Do they have a website? Are they registered with your state? Are they licensed and insured? These are all indications a self-employed person is legitimate. (You might even be able to check out their pricing if you find their website!)
I had to rent a home a few years after I transitioned into freelancing, and my portfolio and published links (like those right here at Millionacres) were just a few of the items that helped prove my business’ legitimacy and success.
3. Request bank statements
If you want the most accurate depiction of the tenant’s income, ask for recent bank statements (business ones, if they have a business account). Pay careful attention to the deposits — how much they are, the consistency/cadence of them, etc. — and make sure the expenditures don’t outweigh the incoming cash.
Tax returns can work for verifying income, too, but these often don’t reflect the person’s full earnings — nor are they the most updated picture of their cash flow (they are annual, after all).
4. Pay special attention to their credit report
You’ll also want to pay special attention to the tenant’s credit. Look at the balances on any credit cards, loans, or other accounts they have out, as well as the monthly payment those come with.