Due Diligence & InspectionQuestion 48
How to Verify Rental Income Claims on a Houston Property?
Request copies of actual leases, bank deposit records, and tax returns (Schedule E) from the seller. Cross-reference claimed rents with market comparables.
Sellers sometimes inflate income figures to justify higher prices. Always verify independently.
- Request current leases: Review signed lease agreements for all units. Verify terms, rent amounts, and tenant names.
- Bank statements: Ask for 12 months of bank deposits showing actual rent collection.
- Schedule E tax return: The seller's tax return (Schedule E) shows reported rental income. Hard to fake since it goes to the IRS.
- Market rent comparison: Verify claimed rents are achievable by checking Zillow, Rentometer, and calling local Houston property managers.
- Estoppel certificates: For multi-tenant properties, have each tenant sign a certificate confirming their rent amount and lease terms.
Bottom Line
Trust but verify. Never base your purchase price on the seller's claimed income without independent documentation. Underwrite to market rents, not above-market claims.