How I verify tenant income from pay stubs in under a minute

Question

I manage a few rental units and got tired of manually reading through pay stubs every time I screen tenants. Different employers use different payroll providers (ADP, Gusto, Paychex...) and every stub looks different.

I started using a tool that reads the PDF and pulls out the numbers - gross pay, net pay, deductions, YTD totals. Takes about 15 seconds. Then I just check if monthly income hits the 3x rent threshold.

The math validation is the part I like most. It checks that gross minus deductions actually equals net pay. Caught a stub last month where the numbers didn't add up.

Anyone else automate this part of screening? What's your process for verifying income?

Kevin Sobilo · Answer

@Aaron Parker, a few thoughts:

1. I think automating is a fine idea. I'm not sure with a few units its worthwhile to most people, but if it was worthwhile to you that's great!

2. Math validation is good because there are more and more fake paystubs being presented.

3. However, there may be MORE things than the math to catch a fake paystub. For example, wonky fonts. I had a paystub recently that must have been hand edited and the fonts where it was edited didn't quite match. Also verifying the business itself. In my example here the business existed! However, it was located at a different address.

4. There is MORE to validate than the simple math! For example, what if the person works OT in winter because they drive a municipal snow plow but in summer they do not get OT. This time of year, their paychecks are going to project out to a MUCH higher income because winter has just ended.

5. Sometimes there are "other things of interest" on a paystub! For example, you might see wage garnishments for things like child support. MANY/MOST landlords don't factor in debts to their tenant screening. (See #6)

6. The GROSS income 3x rent rule of thumb roughly parallels the "front end ratio" used by lenders to qualify applicants for a mortgage. When I realized this, I thought about it and believe it makes perfect sense to take it 1 step further and apply a "back end ratio" like they do with mortgages as well!

A "back end ratio" compares BOTH rent and monthly debt payments to income. Sometimes an applicant meets the income 3x rent rule but has outsized debt obligations like a $1,000 car payment or garnished child support (#5) payments. So, I apply this second screening criteria:

Rent + Monthly Debt Payments <= 45% x GROSS Monthly Income

I get an estimate of their monthly debt payments from their credit report and add anything else I find like wage garnishments to that.

7. If I was going to automate the math as you suggest, I think I would need to double check it and also look at these additional items like OT.

In addition, many people have multiple incomes now and many are 1099. So, automating the reading and match of the paystubs alone doesn't really automate that whole process. For me, I might just make a spreadsheet with a nice input screen to prompt me to capture all the data items and also a checklist of things I should look for to verify the validity of documents.

Drew Sygit · Answer

What about calculations being off due to illness, layoffs, etc.?

We flag these and ask for acceptable explanation...

Drew Sygit · Answer

Reviewing multiple paystubs is inefficient🙄

We have an Excel sheet we designed. We enter pay thru date, not pay date, YTD gross and either hourly rate, or salary and it automatically calculates monthly they should be making and actual monthly average.

We also input last year's W-2 income, average that for 12 months AND average last year + this year YTD to have a better average income.

We compare all 4 average income numbers and investigate variations of more than 10%😎

Aaron Parker · Answer

@Drew Sygit that's a fair distinction. Checking that the math adds up on a stub is really just calculation, not verification. Real verification means calling the employer, cross-referencing tax returns, confirming the business actually exists at that address.

The way I see it, the math check is just the first filter. If gross times pay periods doesn't even match the YTD, something's off and you can skip straight to rejection without wasting time on deeper checks. But yeah, a stub passing the math test doesn't mean the income is legit.

Aaron Parker · Answer

@Drew Sygit good point. Illness or a recent layoff will definitely throw off the numbers even if the math itself checks out.

What I usually do is look at consistency across multiple stubs rather than just one. If someone's hours dropped for a pay period, that shows up when you compare it to their YTD averages. A single stub in isolation can be misleading either way.

For layoffs, I ask for the most recent 2-3 stubs plus a bank statement showing deposits. If the stub is from a previous employer and they claim new employment, I want to see an offer letter with salary info too.

Flagging and asking for explanation like you do is really the right call. The automation just helps me get to those questions faster instead of spending time on the basic number crunching.

Drew Sygit · Answer

I wouldn't say you're, "verifying income".

You're only calculating income.

Aaron Parker · Answer

@Kevin Sobilo really appreciate the detailed breakdown. You're spot on with several points.

The OT/seasonal income issue (#4) is something I didn't think about enough. A snow plow driver's winter stubs would project way higher annual income than what they actually make. Just checking if gross x pay periods = YTD wouldn't catch that.

Your point about wage garnishments and child support (#5) is also really practical. The 3x rent rule alone misses a lot when someone has $1,000/month in garnishments eating into their take-home. The back-end ratio approach makes a lot of sense.

And you're right that automating just the paystub reading is only one piece of the puzzle. The full screening process has so many more steps that need human judgment. Font checking, verifying the business actually exists at that address, calling the employer directly. A tool can help with the math but it can't replace the full verification workflow.

@Paul Olusola thanks for the feedback. Right now income verification from pay stubs is the main focus. Kevin's reply actually highlights why the broader screening process is hard to fully automate. There are too many edge cases that need an experienced eye.

Stefanie Bradford · Answer

Hi Aaron, maybe I missed it but can you share the tool you are using? Thanks!

Paul Olusola · Answer

Smart system the math validation is the part most people skip and that’s exactly where fraud slips through. Do you automate any other parts of the screening process or is income verification the main piece you’ve tackled so far?

How I verify tenant income from pay stubs in under a minute

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