Renting to a small business owner

4 Replies

Aloha,

I have a unit in Oahu Hawaii that some one from another Island applied to rent out. He is going to be living there but not running his business out of the unit. As being self employed he does not have much reported income, he will be using his business to pay for the rent. What are the documents that I should be asking for tax returns, financial statements, what is the best way to verify income? I have not rented to someone that is self employed before any other things to look out for? 

Thanks for any tips

Hi Tauno,

While I’ve never rented to a person who runs a small business, I have been involved with financing vehicles to people who run small businesses multiple times over the last decade.

In this case, the individual is the guarantor on the loan, meaning we still check the individual’s credit and ask for financial statements/W2s etc.

Both of those pieces should give you a good insight as to what to do.

You can also check the DCCA website to see if the business is in good standing.

Hope his helps.

X3 the rental income, run credit history to see payment habits, background and all other items like any other applicant. In their case outside of employment verification, check the business's profit and loss or whatever they call those docs (have them provide, then verify). Where I may be unsure I also seek last 2 to 3 months of bank statements just as lenders do when evaluating your application for DTI ratio and reserves. Check any kind of savings and maybe ask for deposit, 1st and last months rent if you can in Hawaii (beautiful place :)). In the end, it is no different, at least not for me. As long as your income is obtained through legal sources and you can show stability in that income, how you get it, i.e. self-employed or W-2 is of little importance to me and not something I choose to focus on, nope too many other things to do particularly as a self-managing, fully employed REI. I do not however allow operation of business out of the unit and I have that in my lease. I think you said you do the same. Cheers! @Tauno Peters

@Allyn Wijnveldt thanks for the response that helps. I noticed you joined recently (I'm kind of a lurker hahahaha). I just got my real taste license and have a background in construction if you would ever like to get together for coffee one day let me know!

@Anna M. thanks for the tip about bank statements.

Originally posted by @Tauno Peters :

Aloha,

I have a unit in Oahu Hawaii that some one from another Island applied to rent out. He is going to be living there but not running his business out of the unit. As being self employed he does not have much reported income, he will be using his business to pay for the rent. What are the documents that I should be asking for tax returns, financial statements, what is the best way to verify income? I have not rented to someone that is self employed before any other things to look out for? 

Thanks for any tips

 You should look for the same things you look for with all of your tenants. The fact that he is self employed shouldn't matter to you. That's his issue, not yours. You have a set of criteria, do not deviate from it for any tenant.