I’m relatively new to land lording and need some opinions/advice from more experienced investors. How would you screen someone’s income in the following scenario:
An applicant for one of my units said he is semi retired. He said he lives off his stock investment portfolio and has a small computer business with two employees. His income varies from month to month, and it sounds like the computer business isn’t a full time gig.
What type of documents should I ask from him to ensure he meets the 3x rule?
Any help is appreciated!
@Marc Miller I have run across this several times while renting A class rentals here in La Grange, IL, and it is fairly simple to do. You can ask for several month's or even a year's worth of his business bank statements if he is running his business the right way. This would show generally how much he makes. Business income will be less steady than W-2, but you can take the average and you should be fine.
For the stock portfolio, just ask him to send the last two or three statements. That is easy to check through, and if he really has a significant balance then you are in a perfect position here.
Thank you for the help John!
@Marc Miller no problem! Let us know the outcome. It sounds promising on the surface.
@Marc Miller I agree with what @John Warren suggested. If the tenant has a business, looking at their tax returns is one way of verifying their income. Asking for bank statements and maybe a statement of profit and loss (if they have one) is also useful. As for their stock portfolio, looking through their statements is best.
@Sharlene Mulchandani you may also want to ask for his 1040 to see what income he reports to the IRS.