Evaluating a Self-Employed Renter

A self-employed renter can be a scary prospect. Not only does a landlord have to worry about the potential instability of a tenant’s income—where lulls in sales or the loss of a client could put them behind on rent—but the viability and success of the business itself. Consequently, evaluating a self-employed renter’s housing application can be tricky. You don’t want to dismiss their application out of hand, but you also want to ensure that they will be able to pay their rent—preventing potentially costly and time-consuming problems down the line. Fortunately, there are several actions you can take to determine if a self-employed applicant is the right tenant for your rental.

When a tenant is self-employed, their income comes from the business or services they sell. One way to assess if they will have the necessary income to pay rent is to look at the legitimacy and viability of the business itself. Does the applicant have a website? What about proof of prior work or stable clientele? Are they registered as a business entity? (This will typically be as an LLC—Limited Liability Corporation).

In addition to investigating the legitimacy of the business, you can also request an applicant’s bank statements or certain tax return documents to verify typical income flows. Review the consistency of deposits and the level of fluctuation. If the income is particularly unsteady or suffers volatility that could cause the applicant to be unable to make rent, this might be cause to consider rejecting the applicant. If you find that the applicant’s business provides steady income, it could provide reassurance in your decision to rent to them.

Aside from the applicant’s business, it is important—as with any renter—to screen the applicant themself. Even if an applicant is self-employed, a person with a history of on-time payments gives you more reason to expect the same. On the other hand, with an applicant with bad credit or a past eviction, you might be better off moving on to the next candidate. An applicant’s history can be determined with a series of reports—such as a tenant credit report, background check and eviction reports. While you should do this for any applicant, it is particularly important for self-employed tenants, as other qualifying indicators may be lacking.

While self-employed applicants can be a source of concern, there are ways to verify their suitability. By evaluating their business and income flows, and thorough tenant screening, landlords can be confident in their decision to rent to a self-employed tenant.