Bank Statements for prospective tenants

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Kim Meredith HamptonBusiness Member
Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
9y

@Tristian Cox they only time I typically ask for bank statements is if someone is on disability, self employed, has a trust fund etc...I also ask for 2 years tax returns if they are self employed. If they are a W2, I ask for their most recent pay stubs, as well as checking with the employer if there is continued employment

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  • Nicholas Covington
    Mortgage Broker · Dallas, TX · Member since 2017 · 657 posts · 275 votes
    9y

    @Tristian Cox Hello!

    Income is not a discriminatory factor unless denying based on receiving public assistance. So in this case you are allowed to ask for bank statements to verify proof of income to afford rent. The only thing is that they are not required to do so, even if asked.

    Best of Luck,

    Nick

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  • Tristian Cox
    OP
    Investor · Highland Park , NJ · Member since 2014 · 80 posts · 13 votes
    9y

    Thanks @Nicholas Covington this is year 2 for me as a landlord and one of my better tenants is moving out. I loved them because they kept the place clean and paid on time! I want to get another good tenant in there so I am attempting to be diligent.

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  • Nicholas Covington
    Mortgage Broker · Dallas, TX · Member since 2017 · 657 posts · 275 votes
    9y

    @Tristian Cox 

    As one should! Everyone LOVES great tenants! I am sure there are tons of advice on screening tenants somewhere in the forums. Just do a quick search and soak in the knowledge, you might come across something new...well more like you will!

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  • Kim Meredith HamptonBusiness Member
    Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
    9y

    @Tristian Cox they only time I typically ask for bank statements is if someone is on disability, self employed, has a trust fund etc...I also ask for 2 years tax returns if they are self employed. If they are a W2, I ask for their most recent pay stubs, as well as checking with the employer if there is continued employment

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  • Ray Harrell
    Investor · Chicago, IL · Member since 2016 · 1k+ posts · 930 votes
    9y

    I would hesitate to ask for bank statements and here is why. Let's say they give you a bank statement and for some reason you deny them. They later indicate that the reason they were denied is because you saw on their bank statement transactions donating to a particular political party or religious organization or ethnic organization. Or they could say you saw they they have some transactions that caused you to unjustly question their morals.

    Not saying you would do that but you open yourself to litigation. Check stubs and proof of income should be sufficient. You don't need to know how they spend their money.

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  • Max T.
    Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
    9y

    @Ray Harrell that is a bit silly. They would have to prove the reason for discrimination. But hey, it never hurts to be careful.

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  • Ray Harrell
    Investor · Chicago, IL · Member since 2016 · 1k+ posts · 930 votes
    9y

    It's really not silly. I work in HR, and these such cases come up every single day! It may seem silly to you, but to the person who was denied a lease and who has such things on a document you asked for, they DO think, "I wonder if she denied me because of X, Y, Z transaction on my bank statement?"

    For people in positions of privilege, you don't think about these things because you've never had to experience such discrimination. But for those of us who have experienced it, blatant and covert, it's always in the back of our minds.

    Think it's silly all you want, but until you've experienced it, it doesn't become real.

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  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    9y

    I normally ask for bank statement if they are using savings to pay rent or for another reason I need to know they have backup funds such as self employment.  Although in another thread I think every California landlord was saying they ask for them. Not sure about NJ.  It really is to some extent  regional. In my area asking for documentation I am in a minority but that is non-negotiable. For Bank statements they are free to redact some information as long as it is not thier name.  Just keep in mind that a good tenant money is only part of it. 

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  • Account Closed
    Johnson City, TN · Member since 2014 · 586 posts · 705 votes
    9y

    Just for sake of discussion, what would you say if a prospective tenant asked to see your bank statement and tax return in order to gauge your ability to continue to pay the mortgage on the house you have for lease? People do quit paying mortgages but continue to collect rent.

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  • Samir Shahani
    Investor · Easton, PA · Member since 2017 · 131 posts · 102 votes
    9y

    You can ask for whatever you want.  It is your house, land, etc.  You want to make sure you get a decent tenant w/ all the necessary facets required to pay the rent. If you want to see proof of their 3rd uncles income, you are totally entitled to ask.  

    The real question, however, is what is relevant to ask a tenant.  As a landlord, the real important questions/proof required in my mind is:

    -W2 / income verification

    -4-5 recent pay stubs

    -Credit Report

    -Background check

    -Proof of assets (stocks, 401k, cars, etc.)

    -Proof of liabilities (personal loans, student debt, car loans, etc)

    -References from previous landlord (if possible)

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  • Penny ClarkPro Member
    Sacramento, CA · Member since 2014 · 513 posts · 319 votes
    9y

    @Tristian Cox as a landlord, you need to verify income to establish the tenant has necessary funds to pay the rent. I use bank statements whenever the applicant owns a business that operates on a cash basis; (tattoo artists, hair dressers, Lyft drivers) or to confirm they regularly receive deposits for Social Security, Disability, SSI, their work site, and is the stated amount on their application. Always ask for two years of tax returns with schedule E for those who are self-employed. The norm is using W-2s and pay stubs to verify employment if they have that type of income ;However even with these, you'll also want to google the employer and contact HR to confirm the applicant is employed there. When you do your showing or during the application process, collect a signature on an employment and landlord rental history verification form from applicant stating they grant you permission for them to release that information.

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  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    9y

    "Just for sake of discussion, what would you say if a prospective tenant asked to see your bank statement"

    I personally would give them points in my screening score for being responsible tenants. I believe tenants should be screening their landlords the same as landlords screen tenants.

    If they were serous I would provide it without any issue since I do not feel that money is something anyone needs to be secretive about (unless they are hiding something illegal).

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  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    9y

    @Tristian Cox I have asked for bank account statements before, usually as an extra step when income is borderline. Last person I did this on was a couple years ago. The bank statement had a negative balance for both months. Half the charges were for golfing at a country club. Any time income is borderline, I like to see evidence that the person can properly manage their money, which means carrying a positive balance in your account. 

    @Ray Harrell when I apply for a loan, the bank asks for my last two months statements on all my accounts. I am responsible with my money and have nothing to hide. As far as your concern about political or religious donations, I am skeptical that any of my tenants donate to anything beyond their own wants. It depends on the class of renter, but most poor and middle class tenants are struggling to get by. I think it is reasonable for me to expect money in an account when someone is writing checks. 

    @Account Closed I was surprised at your answer that you gave to Tim's question. Your general view on tenants is that they are not equals and shouldn't be treated as such. It seems strange you would provide personal financial information to an applicant. I get your point that you have nothing to hide, but would you really actually agree to something like that? 

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  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    9y
    Originally posted by @Ray Harrell:

    It's really not silly. I work in HR, and these such cases come up every single day! It may seem silly to you, but to the person who was denied a lease and who has such things on a document you asked for, they DO think, "I wonder if she denied me because of X, Y, Z transaction on my bank statement?"

    For people in positions of privilege, you don't think about these things because you've never had to experience such discrimination. But for those of us who have experienced it, blatant and covert, it's always in the back of our minds.

    Think it's silly all you want, but until you've experienced it, it doesn't become real.

     If I ask for statements, the sole purpose is to verify deposits, not inspect spending habits.  Simple affidavit to that effect defeats the objection.

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  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    9y

    I get your point that you have nothing to hide, but would you really actually agree to something like that?

    If I were to ask for a applicants bank information I would absolutely provide mine if they asked, however I do not ask for bank statements only two consecutive pay stubs so I suppose I am agreeing to something that would never actually happen.

    You are correct I do not consider applicants as people only a collection of facts but once I get to a certain point in screening there is transfer of information both ways as I approach accepting them and they decide if they truly still want to rent from me. 

    It is extremely rare that I have rejected a applicant by that point in the screening so in reality would be providing the information to someone I highly believe I will be accepting. Prior to that I would not rush to provide any information beyond the particulars of the lease. 

    My screening is extremely thorough, falling just short of taking DNA and performing a  rectal exam, so I feel it is only fair to answer all their questions and be as forthcoming as possible with whatever information they require. At that point they become a tenant/person. 

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  • Fred Winer
    Vendor · loganville, GA · Member since 2017 · 54 posts · 22 votes
    9y

    You can ask for Bank Documents for Income Verification only.

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  • Fred Winer
    Vendor · loganville, GA · Member since 2017 · 54 posts · 22 votes
    9y

    As a landlord, we don't ask for them unless the tenant does not have sufficient verifiable income. Along the same lines, if I was renting, I would only expect to provide a copy of a bank statement if I did not have a job yet, or was retired, and had to show I could support myself. Even then, I would only give the summary page, with the account number blacked out. 


    Just a heads up. You are making a judgment about these particular applicants that they have no savings. Hopefully you have it on your written requirement list that you always require copies of bank statements when the household only has 1 income (including if you have a single person), otherwise these applicants could accuse you of discrimination. Whatever your rules are, stick with them. If you require a credit score of 650 and 2.5 x the rent in income, stick to that. If they don't meet your minimum requirements, turn them down. If they do meet your requirements, and you are still too nervous about them, maybe your requirements need a review. 

    Finally, I will say you need to accept the fact that when you have tenants, life happens. We manage 150 units, and this week I had 2 tenants call me and say they needed to break the lease because of a divorce, and one who needed to break the lease because they were getting married (it was a crazy week, that totally isn't normal to have 3 in one month, let alone all in one week). We have a lease break clause in our lease that describes the penalties and procedure, so they knew exactly what to expect. Think about putting one into your lease. Life happens, and people do sometimes have to break their leases due to marriage, divorce, death in family, job loss, etc.

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  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    9y

    The primary reason for not needing bank statements is due to landlords screening standards requiring income being 2X, 3X rent. If this is your standard it does not matter what they have in the bank. I have turned down applicants with insufficient income providing proof of close to 100K in savings. With no income once the savings are pi**ed away they have no way to pay rent.

    If they can not prove steady income meeting requirements they do not qualify.

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    9y
    Originally posted by @Fred Winer:

    You can ask for Bank Documents for Income Verification only.

    Is this your opinion or is there some legal precedent to support this?

    What if the bank statement shows negative balance and multiple NSF charges from bounced checks? But the income checks out.

    Not arguing, just trying to understand your logic.

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  • Bob B.
    Investor · Jasper GA · Member since 2015 · 1k+ posts · 1k+ votes
    9y

    I have asked for bank statement info. to prove that the applicant pays their rent on time.  A lot of landlords and apartments will not give references and it is not uncommon for a landlord to give a good reference (lie) to help a PIA tenant obtain new housing.  The prospect can print out a selective statement showing their rent payments and deposits only if they choose.

    They would have a hard time proving that I discriminated because I saw they made a donation. By the time I ask for bank info we are well on our way to qualifying them.

    I have never had a tenant ask me for a bank statement and would have a hard time renting from me if they did. It is none of their business.  I am renting them a piece of property worth more than their total net worth and I'm going to know far more about them than they will ever know about them.

    @Ray Harrell, Can you show us where a LL has ever been successfully sued because of discrimination attributed to looking at their check statement?  Mortgage companies require them all the time.

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  • Ray Harrell
    Investor · Chicago, IL · Member since 2016 · 1k+ posts · 930 votes
    9y

    @Bob B., mortgage companies have been known to discriminate. It's nothing new. I didn't say LL DO discriminate based on bank statement information. I said it's possible to use information to discriminate, and to avoid such claims, try to find other ways to verify income for prospective tenants.

    0Reply
  • Bob B.
    Investor · Jasper GA · Member since 2015 · 1k+ posts · 1k+ votes
    9y

    @Ray Harrell

    We can not run our business afraid of the shadows.  We need to be reasonable and realize that there are always risks.

    1Reply
  • Fred Winer
    Vendor · loganville, GA · Member since 2017 · 54 posts · 22 votes
    9y

    hey Joe your cool then you can or should base your decision on their financial track record and its negative.

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  • Ray Harrell
    Investor · Chicago, IL · Member since 2016 · 1k+ posts · 930 votes
    9y

    FYI mortgage companies have been known to discriminate for decades, the most recent PROVEN CASES happening in 2016 by a MAJOR bank! Outright discrimination, higher interest rates, redlining, it's all recorded in history. Again, if you've never been the culprit or victim of it, it may be hard to believe. But a person who has been a victim of housing discrimination, I know the tools they use to accomplish it.

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