How do you screen applicants with non-traditional income sources?

1 Understand the income types

Non-traditional income sources can be categorized into two types: variable and consistent. Variable income sources are those that fluctuate depending on the demand, season, or project, such as freelancing, gig work, or commission-based sales. Consistent income sources are those that provide a regular and predictable income, such as self-employment, online platforms, or passive income streams. Understanding the income types can help you assess the risk and stability of each applicant.

2 Ask for documentation

The most common way to verify income is to ask for documentation, such as tax returns, bank statements, invoices, contracts, or pay stubs. However, some non-traditional income sources may not have all these documents readily available, or they may not reflect the current or future income potential. In that case, you can ask for alternative documentation, such as letters from clients, testimonials, portfolios, or online reviews. You can also use online tools or services that can verify income from various sources, such as PayPal, Venmo, or Stripe.

3 Set income standards

To screen applicants with non-traditional income sources, you need to set clear and consistent income standards that apply to all applicants. A common rule of thumb is to require that the monthly income is at least three times the rent amount. However, you may need to adjust this ratio depending on the market, the property, and the applicant's expenses and debts. You can also consider other factors, such as the length and frequency of income, the diversity and reliability of income sources, and the growth and stability of income.

4 Check credit and references

Another way to screen applicants with non-traditional income sources is to check their credit and references. A credit report can show you how well the applicant manages their finances, pays their bills, and handles their debts. A good credit score can indicate that the applicant is responsible and trustworthy, even if their income is non-traditional. You can also contact the applicant's previous landlords, employers, or clients to get a better sense of their rental history, work ethic, and reputation.

5 Be flexible and fair

Finally, when screening applicants with non-traditional income sources, you need to be flexible and fair. Non-traditional income sources are becoming more common and diverse, especially in the wake of the pandemic and the rise of the gig economy. You don't want to miss out on potential tenants who may have good income potential, but don't fit the traditional mold. You also want to avoid discriminating against applicants based on their income source, as long as they meet your criteria and comply with the fair housing laws.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?