Understanding Gig Economy and Freelance Income for Tenant Screening

For property managers and landlords, understanding gig economy and freelance income for tenant screening requires a flexible, nuanced approach, especially given these income streams’ variability and often unpredictable nature.

This article focuses on key points property managers should consider during the screening process.

Examples of freelancer and gig economy jobs and their rise in popularity in recent years

The freelancer and gig economy have seen significant growth in recent years. According to the 2022 McKinsey study, 58 million US workers are independent, and roughly 69% of those 58 million are gig workers.

One key driver of the gig economy’s rise in popularity is the flexibility it offers. Workers can choose their hours and gigs, which is particularly appealing for those needing supplementary income or balancing other responsibilities.

The rise of smartphones and app-based platforms has made it easier for freelancers to find gigs and for companies to reach a large pool of potential workers.

Another driver has been recent economic uncertainties and the desire for additional income streams pushing more people towards gig work. Here are some popular freelancer and gig economy jobs and how they’ve soared in popularity:

Ride-Sharing Services

Uber allows individuals to use their personal vehicles to provide rides to passengers. Launched in 2010, Uber revolutionized urban transportation, quickly expanding globally. The convenience of on-demand rides and flexible working hours attracted many drivers, contributing to its rapid growth.

Like Uber, Lyft provides a platform for drivers to offer rides using their personal vehicles. Founded in 2012, Lyft gained popularity by focusing on a friendly, community-oriented brand. Its expansion across the U.S. has made it a major player in the ride-sharing market.

Food Delivery Services

Postmates is a food and goods delivery service where freelancers deliver items from restaurants, stores, and other local businesses. Founded in 2011, Postmates saw dramatic growth due to the increasing demand for food delivery services. Its acquisition by Uber in 2020 further integrated it into the gig economy space.

Task-Based Services

TaskRabbit connects freelancers with clients needing help with various tasks, such as home repairs, cleaning, and moving. Founded in 2008, TaskRabbit capitalized on the growing trend of outsourcing everyday tasks.

Pet Care Services

Rover is a platform for pet-sitting and dog-walking services. Launched in 2011, it has become popular due to the increasing number of pet owners looking for reliable animal care.

Wag is another dog walking and pet care service platform. Founded in 2015, this service quickly grew by offering on-demand dog walking services, leveraging the convenience of app-based bookings.

Documents to request from freelancers or gig economy workers and how to spot any fraudulent activity

Confirming self-employed prospective tenants’ income and financial stability can be daunting for landlords or property managers due to the variability and complexity of their earnings.

To ensure a thorough review, request a range of documents. Here’s a list of key documents to ask for:

Tax Returns. These are some of the most reliable sources of information about a self-employed applicant’s income. Request the last two years of federal tax returns. Spend time on IRS Form 1040, Schedule C (Profit or Loss from Business), Schedule E (Supplemental Income and Loss) and Schedule F (Profit or Loss from Farming). Compare the tax returns from the last two years to identify any significant changes in income. Stable or increasing revenue is a positive sign. 

Bank Statements. These documents provide insight into a prospective renter’s cash flow and consistency of income. Request statements from the past six to 12 months and keep an eye out for regular deposits and overall financial activity. It’s also wise to look for consistent, regular deposits that line up with the income reported on tax returns. Erratic or inconsistent deposits could be an issue.

Profit and Loss Statements. These statements summarize the revenues, costs, and expenses incurred during a specific period. They can give landlords a clear picture of the applicant’s business performance. Ask for the most recent profit and loss (P&L) statements, ideally for the past year or the current year-to-date. Review for increasing – or consistent – revenue over the months or quarters. Sudden drops in revenue will need further explanation. 

1099 Forms. Self-employed applicants often receive 1099 forms from clients, which report income from various sources. Ask for 1099 forms from the previous year – they can help verify income consistency and the total amount earned. When reviewing, add the amounts on all 1099 forms and compare this with the income reported on the tax returns and bank statements. Multiple 1099 forms from various clients point to a diversified income stream, typically a positive sign. 

How to utilize third-party verification services to help you spot discrepancies

Verifying income and employment can be more complex with the rise of gig economy workers and freelancers.

Utilizing third-party verification services can streamline this process, providing property managers with accurate, reliable data while helping to spot discrepancies.

Here’s how to effectively use these services:

Choose reputable providers. Pick well-known, trusted third-party services to ensure reliability and accuracy.

Integrate with the screening process. Incorporate third-party verifications into your standard tenant screening workflow for consistency.

Request comprehensive reports. Select services that deliver detailed reports covering numerous aspects like income, credit and background checks.

Cross-check information. Use third-party reports to cross-verify information the potential renter provides, looking for any discrepancies.

Stay compliant. Ensure all verification processes comply with Fair Housing Laws and the Fair Credit Reporting Act (FCRA).

Snappt x Argyle

In an effort to simplify verifying applicant income, Snappt has partnered with Argyle, the leading provider of direct-source access to real-time income and employment data. This partnership will bring connected payroll to Snappt customers as part of their recently announced Applicant Fraud Detection and Income Verification Suite.

With Argyle, companies automate critical workflows—including income and employment verification—and make it easy to verify gig income. They support 25+ gig platforms, including Uber, Postmates, and Rover. This integration will not only streamline the income verification process but also ensure compliance with Fair Housing Laws and the FCRA by providing direct-source access to accurate and current income and employment data.

“The sustained growth in the gig economy has required a new way of thinking about verifying and assessing income stability. Gone are the days when a simple paystub or W-2 captured everything we need to know about prospective tenants’ ability to meet rent, “saysShmulik Fishman, CEO of Argyle, “That’s why we partnered with Snappt – to give property managers and landlords the tools they need to properly screen a new generation of worker with multiple, nontraditional income streams, while also helping to ensure those workers have fair access to housing they can afford.”

How to stay legally compliant

Property managers and landlords must navigate a complicated landscape of legal requirements to ensure legally compliant practices when screening self-employed applicants. Unfortunately, failing to stick to these regulations can result in legal repercussions and discrimination claims.

Here are some steps you can take to stay legally compliant while handling gig and freelance applicants:

Understand Fair Housing Laws. Fair housing laws, enforced by the U.S. Department of Housing and Urban Development (HUD), prohibit discrimination based on race, color, national origin, religion, sex, familial status and disability.

Apply screening criteria consistently. This can prevent discrimination claims and ensure the fair treatment of all prospective renters.

Provide adverse action notices. The Fair Credit Reporting Act (FCRA) requires property managers and landlords to provide potential tenants with an adverse action notice if they deny an application based on information received from a credit report or other consumer report.

Stay up to date on local and state laws. Local and state laws may have additional requirements and protections beyond federal regulations.

Be transparent and communicate. Honesty and transparency during the screening process help build and develop trust and minimize misunderstandings or accusations of unfair treatment.

Conclusion

By taking the above steps, property managers and landlords can more accurately assess the financial stability of tenants with gig economy or freelance income, ensuring a fair and thorough screening process.

For any applicants with a W2, check out our guide on spotting fake paystubs. And for more information on Snappt’s upcoming income verification offering, check out our product page.