Getting lots of information about a rental applicant is critical in conducting a thorough background check, but many landlords overlook the value of the pay stub. In this episode of Night School, we’ll reveal what kinds of valuable information landlords can gather from an applicant’s pay stub.
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Transcription of Episode 107: What a Pay Stub Can Tell You About an Applicant
Man: Nothing will crush a real estate investor’s spirit like landlord stress. The difference between being successful and miserable in managing properties is education. Welcome to Landlord University, where landlords learn. Landlord University is recorded from inside the RentPrep office, where Stephen White and Jeff Pearson share the lessons learned from working with some of the most successful landlords.
Jeff: Welcome to Landlord University Night School. I’m Jeff Pearson. I’m here with my co-host, Stephen White. Hello, Stephen. How are you doing this evening?
Stephen: Hey, I’m good, Jeff! So, if you caught our last episode we were talking about the importance of getting a driver’s license from applicants, cause you can find a lot of information hidden on that driver’s license. That either you’re not legally allowed to ask them or maybe they didn’t give up, maybe their address or a date of birth or a legal name that they go by. So we’re taking that same kind of promising idea. We’re now gonna talk about pay stubs and how valuable a pay stub can be during the application process, even if you’ve already verified their income. So, you may have already have called their employer or you hired RentPrep to call their employer and we’ve done the income verification and we’ve gotten the information on, what their position is, their start date and their salary, you know all that. So, what other things can pay stub tell you about an applicant? And Jeff, you being an HR you know that a lot of times on your pay stubs there’s a lot of hidden gems in there…
Stephen: For a landlord..
Jeff: Yes. Yes, obviously, you can usually get social security number, the year to date earnings, which is gonna tell you how long they’ve been working on. If it’s September and they’re making $2000 a pay period and they only have $6000 year to date earnings, then you know they’ve only had that job for short period of time.
Stephen: Exactly! And another thing is if you’re dealing with somebody who’s out commission job, the year to date earnings could really tell you a lot too. Because what they claim that they’re making, a lot of times does not add up, what actually their year to date earnings are.
Stephen: So, aside from the earnings, obviously, earnings, social security number, but then you’ve got their legal name, you know you, when you fill out your W-4 I believe it is, you’re putting down your legal name, what the IRS knows you at. So, I would say your pay stubs probably gonna have the most accurate legal name for you because that’s where you’re known in the system.
Stephen: Especially the IRS.
Jeff: Yes, that supposedly the legal name that you use with the IRS.
Stephen: Another huge piece here is something that you really won’t probably get anywhere else, I say probably because, I’m talking about wage garnishments. You can sort of piece the puzzle together on wage garnishments if you were to look up judgment against somebody and you were able to see “okay, this person had a judgment”, and you know, they’ve had it for several years and it was re-filed for a lesser amount and you can deduce that probably getting their wage garnished, but there’s no database that’ll tell you this person has wage garnishments. Paystub, it will tell you what the wage garnishments are, how much they are and who’s garnishing the wages.
Stephen: So, again, another huge piece. And just to answer any questions we get a lot from landlords are should you consider the wage garnishments? Absolutely, you should consider the wage garnishments. That counts against their gross pay, their salary…
Stephen: So you know..
Jeff: Well, it counts against their net income..
Stephen: Well yeah, exactly, that’s right!
Jeff: And some wage garnishments can be as much as 50% of their take-home pay, especially child custody or child support. If people aren’t paying their child support and they get hit with the garnishment, it’s gonna be the biggest garnishment they can possibly take, so it can be up to 50%. It really impacts your ability to pay for the rent.
Stephen: Absolutely! And that’s one of the judgments that we see pretty often doing background checks is a support judgment. And, so anytime that landlord will call “Hey, what’s the support judgment? There’s really no dollar amount attached to it, it’s just a new filing, it’s a court record.”, and then we explain “Yeah, that means, that gives, you know, somebody the legal right to go after them for support, and that usually means garnishments, or support coming out of their wages, and the only way to find that out at the backend that is to look on their pay stubs and see what it is.” And that usually a good indication too, if you’re looking at their records and you see support judgments in there, you want to look at their pay stubs to take a look and see what is that support judgment costing them every pay period as you said it could be very significant.
Jeff: That’s right and if somebody is taking half of the money that you suppose to get your check every week or every other week, you’re gonna have a hard time making your payments.
Stephen: Sure, sure. And it definitely gives you a lot of times, it speaks to the character of person. You want to make sure that you’re not renting to somebody that has a long history of getting to the point where they’re not paying for things and any debited garnishments put against them. I mean that’s, you know, and a lot of times it’s the same as eviction or a high dollar judgment or something that’s gonna affect them financially, and that’s gonna affect their ability to pay rent so it’s certainly need to be considered when you’re deciding who you’re gonna rent to.
Jeff: Very much so! Well great, that was a very interesting topic and I think that wraps it up. I’ll look forward to talking with you again tomorrow evening.
Stephen: Right, thanks, Jeff!
Man: Thanks for listening to Landlord University and remember to visit rentprep.com/landlordu to see show notes and access to free resources like forms and guides. And be sure to check out Jeff Pearson in his own hit podcast at mentorimpact.com.