5 Proactive Strategies to Prevent Costly Rental Fraud

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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.

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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!

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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.

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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.

About Author

Chris Clothier

In 2005, Chris Clothier (G+) began working with passive real estate investors and has since helped more than 1,100 investors purchase over 3,400 investment properties in Memphis, Dallas and Houston through the Memphis Invest family of companies.

5 Comments

  1. Penny Clark

    Thank you for writing this insightful article, Chris! Whenever a property I manage becomes vacant, I make sure every window and door has working locks and will even put sticks in the windows so potential squatters can’t lift the glass up and access the window. Many of my clients don’t have their rentals wired for security so I’ll also drive by the properties to check on them when they are vacant and give the people next door my card and ask them to call me if they notice anything suspicious.

    Using watermarks on photos is a simple and effective idea I don’t see too often but can see the value in doing it for the properties I manage and rentals I own.

    Taking the extra steps to do background checks and calling landlords and employers to vet applicants is a must. There are people who are advertising their services that cater to fraud. For example, recently I saw an ad on Craigslist in my area that was advertising services to fill out rental applications, provide proof of income and social security verification for would-be applicants.

    If more landlords and property managers put these ideas into practice, there would be less renter fraud.

  2. Jerry W.

    Nice article, thank you for posting it. I do not list the address on my adds on Craigslist, so they must contact me to set up a showing. Some folks want to know the address in order to drive by. In the past I would often just describe where it is without giving the address. Now with Google Earth and other sites that might not work. I will have to be more careful of this.

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