5 Proactive Strategies to Prevent Costly Rental Fraud

5 Proactive Strategies to Prevent Costly Rental Fraud

4 min read
Chris Clothier

Chris Clothier began building his rental portfolio in 2003 as a successful entrepreneur looking to diversify his investments. He quickly gravitated toward passive investing, establishing a portfolio of over 50 single family homes in Memphis, Tenn. As an original client of his family’s firm Memphis Invest (now REI Nation), Chris experienced firsthand what a passive investor endures when purchasing out of state. In 2007, Chris moved his company and family back to Tennessee, wound down his brokering company, and joined REI Nation as a partner and director of sales and marketing.

Experience
Since joining REI Nation, the business has grown into the premier turnkey investment company in the country and a standard bearer for best practices in the industry, managing over 6,000 investment properties for 2,000 passive clients. In addition to managing the development and implementation of sales and marketing processes, Chris serves as an ambassador for the company, working with the team to help potential investors define their purpose for investing in real estate and educating peer companies on best practices.

REI Nation clients’ portfolios hold a value of close to $800 million in single family assets in seven cities. The company has been featured as a six-straight year honoree in Inc. magazine’s list of the 500/5,000 “Fastest Growing Companies in America.”

In 2019, Chris’ team assisted 600 investors with purchasing just under 1,000 fully-renovated and occupied turnkey homes. Chris led the re-brand of his family’s company on January 1, 2020, from Memphis Invest to REI Nation.

Chris is also an experienced real estate speaker and addresses small and large audiences of real estate investors and business professionals nationwide several times each year, including IMN single family conferences, the PM Grow property management conference, and the Ignite conference in Las Vegas each December.

Chris continues to hold a sizable single-family rental portfolio in both Tennessee and Texas. Along with his family, he owns several commercial buildings in the greater Memphis area.

When not working with the team at REI Nation, Chris is busy raising five kids, operating a racing company in Memphis, and serving as CEO for The Cancer Kickers Soccer Club, a Memphis-based 501c3 providing comfort and care for kids battling childhood cancers.

Founded in 2017 by Chris and Michelle Clothier, the non-profit organization focuses on providing a team environment for kids to find encouragement and strength in their battle. The company worked with over 500 children from six countries in 2019.

Press
Chris has been featured in stories published in Money Magazine, The New York Times, The Wall Street Journal, and DN News, as well as the Memphis Business Journal. In 2018, McGraw-Hill Publishing purchased Chris’ manuscript, The Turnkey Revolution, and worked with Chris to publish his first book in May 2018.

Chris also publishes two weekly blogs at ChrisClothier.com and REINation.com. Chris has also published articles on the BiggerPockets Blog since 2009.

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Rental fraud. It’s not fun, and reports of it happening seem like they’ve been going up all across the country. What’s an owner to do? How do you protect your property against such tactics? As the owner of a property management company managing over 3,500 properties in three different metros, closely monitoring for rental fraud is a major issue.

For those of you blessedly unfamiliar with rental fraud, it’s what happens when someone who isn’t you or your manager claims to own your property and then proceeds to rent it out and earn rental income on unknowing tenants. Oftentimes this fraud leads to collected deposits from unsuspecting tenants who are never able to get ahold of the supposed owner again. In the worst case scenario, locks are changed and a tenant is moved into the property without your knowledge.

When they’re inevitably found out, the unfortunate (but still illegal) tenants must be removed, and you’re left with the mess of proving in court that you’re the one that owns the property, on top of other fun complications.

Wouldn’t it be better to avoid the chance of rental fraud in the first place?

Well, we’ve got good news: There are strategies you can employ to greatly reduce your chances to falling victim to such a scam.

Where Do You Find Rental Fraud?

Rental fraud happens in two primary places. When we think of it, our minds mostly jump to criminals breaking in and squatting, posing as owners and renting out your property. But there are plenty of other ways it can happen.

Related: 5 Scams That Trick Landlords Into Accepting Less-Than-Stellar Tenants

Tenants can try to dupe you with an illegal sublease, or like an unfortunate landlord in Queens found out last year, tenants can try to renovate your property and turn a three-bedroom apartment into a ten-bedroom to rent out to tourists on Airbnb. While the latter is not common, it just goes to show that you never know what people will try!

It can even be as simple as crooks stealing your photos and making fake listings on Craigslist in an attempt to swindle tenants out of a security deposit before they cut and run. These scams are real, and they’re part of the reason the public has such a poor view of landlords — people are out there giving them bad names!

craigslist_rental_scam

5 Strategies That Ward Off Rental Fraud and Increase Property Security

1. Have an active security system.

Security systems aren’t particularly cheap, but they don’t have to break the bank, either. For investors who need multiple security systems for their properties, smaller companies may be willing to negotiate since a large account would be a big deal for them. For these investors, a wireless system would be your best bet.

It’s an amenity you can also include in rent and make your tenant pay for; after all, it helps keep them safe, and many tenants would be glad to pay for that peace of mind! Modern systems make it easy to monitor entrances, windows included, and even monitor who is in the property based on customized security codes.

No matter what kind of system you have, knowing that an alarm can be tripped and immediately alert the authorities is a big deterrent for any crook looking to leech off of a property.

2. Keep up with tenant check-ins.

Worried your tenant is going to sneak in people they shouldn’t, sublet illegally, or do something else strange and illegal that constitutes as rental fraud? Give proper notice as always, but make sure you or your managers are being regular with their property inspections so that lease violations are being caught. You may not feel the need to check up on your tenants, but there may be red flags that say you should.

3. Monitor vacant properties.

Tenants aren’t the only ones you should be checking up on. Your rental properties are at their most vulnerable when no one’s living in them. Ensure that your managers are keeping a watchful eye when no one’s around — that’s when opportunistic scammers will jump at the chance to dupe someone. Even if it’s just a once-a-week check-in, it’ll deter scammers from setting up shop on your property. Property security is important — with or without a tenant.

4. Be thorough with background checks.

Sometimes tenants can pull the wool over your eyes, but good background checks can catch a lot. Don’t underestimate the good they do! When you hire a property manager or management company, that’s one of the top priorities you should keep in mind. How thorough and attentive are they going to be in the tenant screening process? The more careful they are in the front end, the more headaches you can avoid.

tenant-scams

Related: 10 Glaring Red Flags That Indicate Your “Great Deal” May Be a Costly Scam

5. Watermark your photos.

Want to avoid fraud and false listings online? Add a watermark to all of your photos! There are a lot of ways to do it, even if you don’t have a lot of experience with photo editing software. It can be your name, company, website, or logo — just something to designate who the photos belong to. This will deter a scammer from stealing because it gives them the extra step of having to try to remove your watermark in order to use your photo.

If they steal your photo anyway, it will be easier for someone to spot the watermark and realize it’s a scam, and they can find and notify you or at the very least report the listing.

Have you ever dealt with property fraud?

Share your story in the comments.