Freelancing has been on the rise over the years thanks in large part to the internet but also with regard to employers who would rather hire an independent contractor instead of hiring an employee. Freelancers can work whenever and wherever they want and set their own terms, as long as they can findscreening freelancers employers who agree with their terms of course.

Yet this rise of entrepreneurs can present a challenge to real estate investors when it’s time to screen potential tenants. What are some of the things freelancers present that require more attention?

Primarily the answer is income. With someone is an employee, full time or part time, earnings can be verified with a third party by reviewing income tax returns, W2s and pay check stubs. Yet freelancers may have several jobs at once and get paid infrequently, most often when a job is completed or in regular intervals until a project is over. There are no pay check stubs and no W2 forms.

There are tax returns however but sometimes the self-employed can find that too many legitimate deductions result is a lower overall qualifying income. So if banks say that rent should represent no more than one-third of gross monthly income, how can that be verified if the income is sporadic and can change from week to week?

The answer lies in bank statements. When reviewing information from a self-employed borrower you can look at both personal and business bank statements and add up the deposits for that month. But don’t stop at one month but look at two or three successive months’ worth of statements. The average total amount of income for two or three months should be three times the amount of rent. If you can verify that type of cash flow, the ability to pay shouldn’t be a problem.