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June 7, 2024

Income Verification for Property Managers

Daniel Berlind

Thorough income verification is a must in the multifamily sector. Property managers need solutions that streamline the process and offer reliable, accurate information to drive well-informed rental decisions.

This article explores why property managers should prioritize income verification and ensure they have the latest and greatest technologies at their disposal. We review various methods for verifying income, shed light on common pitfalls associated with these methods, and highlight the invaluable benefits of robust income verification practices.

Why should you verify an applicant’s income?

Verifying an applicant’s income is the best way to ensure they can afford the monthly rent. It also helps minimize potential risk at your property and enhance tenant quality. Standard rental criteria typically include something like, “An applicant must make 2.5x the rent to be considered for this property.” Well, income verification helps determine that!

Recently, digital technologies have greatly simplified the income verification process, benefiting tenants, property managers, and owners alike. Instead of the traditional, time-consuming method of manually collecting income documents and enduring hours, or even days, of waiting, property managers can now implement income verification APIs. This innovative tool allows for income verification within seconds, seamlessly integrated into the application process.

Income verification methods

Automatic income calculation

Automatic income calculation is an easy-to-use technology that swiftly and precisely sums up amounts from applicants’ documents. Though seemingly simple, this tool proves invaluable to leasing teams by significantly reducing the time spent on reviewing applications.

Bank linking

Linking an applicant’s bank account, also called open banking, allows property managers to confirm the applicant’s financial standing in real time. A step is added to the application process, allowing applicants to easily connect their bank accounts. This streamlined process simplifies the verification of income from gig work and various other unique sources for applicants.

Payroll linking

Payroll linking, or connected payroll, enables applicants to directly link their payroll provider to their application. As a result, the property manager has access to their recent pay stubs, allowing them to confirm employment and income.

Document fraud detection

Document fraud detection reads into the metadata of an income document to ensure it hasn’t been manipulated. Fraud detection is essential to confirm the authenticity of applicant documents – if the document isn’t legitimate, verifying the income won’t matter. Most document manipulations are invisible to the naked eye and are visually identical to legitimate ones. Only by using technology that conducts a comprehensive forensic scan of a document can you be confident that a document is authentic.

Common issues with income verification

Although various income verification methods exist, certain options come with drawbacks.

First, applicants cannot be required to link their bank account or payroll information, and they may not feel comfortable doing so. It’s a great option to provide, but it’s just that – an option. While this option may provide accurate data, it should only be used as an additional method rather than the sole means of verification.

Another thing to note is that not all payroll providers are in every payroll linking system. Depending on where the applicant works, they may be unable to use this option.

Successful income verification also needs to include fraud detection. If the numbers on the supplied documents aren’t legitimate, it can lead to incorrect assessments of the applicant’s financial stability. This can result in a higher risk of defaulting on payments and a rise in bad debt and evictions.

Benefits of income verification technology

Stronger defense against fraud: By offering a variety of verification methods, you not only make the process more convenient for applicants but also strengthen its integrity, reducing the likelihood of fraud and ensuring that only qualified applicants proceed.

Streamlined leasing process: Implementing income verification technology into the leasing process can significantly streamline and secure applicant evaluations. To integrate this technology effectively, it’s crucial to incorporate robust fraud detection measures to ensure the accuracy and authenticity of the provided information.

Easier for applicants: Providing applicants with multiple options for verifying their income, such as connecting their payroll provider, uploading recent pay stubs, or linking to their bank account, can enhance user experience and accessibility. The easier the process is for the applicant, the less likely they are to abandon the application and go somewhere else.

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