How often do we see a tenant being taken to the Tribunal for legal discourse?
All too often.
However, landlords can be victims too, and it needs more awareness.
When times get hard, tenants will sometimes look toward committing rental fraud in some shape or form. Of course, not everybody participates in this activity, but it does happen.
So, if you’re a landlord in Orange County, here are the most common rent scams and how to mediate them.
Hard Times Account for Tenant Fraud
Like most occurrences in life, when life gets hard, people start to turn towards traditional methods of sustaining their livelihood. In many cases, this accounts for the great influx of tenant fraud and rent scams.
As tenants pay a larger portion of their monthly income on rent, they are less capable of overcoming unexpected occurrences of any sort. This places them at risk of future defaults and evictions.
The main reasons for rent scams are:
Loss of Income
The unexpected occurrence of COVID-19 has become a strong force of job loss. During the so-called Great Recession, 8.8 million people lost their jobs. With COVID-19 this number has practically doubled, so it is expected to see rent scams on the rise as well.
Relocation Without Challenge
Without advanced notice, many students were left to find new housing in March after the dorms have forced them out, because of the virus. In such occurrences, desperation leads to a fraudulent apprenticeship.
These issues lead to the acknowledgment that tenant fraud has to be dealt with in some shape or form, but it seems that fraud detection is incapable, as the methods used by property managers are mostly outdated.
How to Detect Rent Scams
Even though traditional approaches do work, nowadays, a combination of technology and common analysis is what leads to successful fraud detection.
Retinal Analysis
The majority of banks use very similar formatting on their stubs and statements. Therefore, one Chase statement should look practically identical to another Chase statement with a variable numeric difference.
Thus, as a landlord, you can verify the integrity of a document by analyzing the formatting of a submitted document.
Consider this when performing a retinal analysis of the applicable documents:
- Does the document look like an original or a scanned one?
- Do similar documents match the presented formatting?
- Do the details align with other documents or are they varying from document to document?
Mathematical Evaluation
In the game of numbers, numbers still play the primary role. As a landlord, you should be able to verify numeric differences in documents.
For instance, if a tenant receives a direct deposit from their work to their bank account, the amount should be equal in measure across all states. If an ending balance does not match a beginning balance of the next month, something is up.
In addition to that, a landlord can verify the pay stubs to examine the year-to-date earnings, and if they appropriately match the statement to statement information.
Intricate Research
Even though a savvy conman can overcome both of the prior analytical obstacles, as a landlord you should research all of the information available on a person online.
Verify the company they work with. Check their LinkedIn, SBA.gov, Open Corporates.
Check their social media to see if they uphold the style of life befitting of your property. Get a feel for their approach to life. Some companies only exist on paper or work history is falsified, so you must spend time intricately researching the person.
When it comes to fraud detection, technology is king. Outsourcing and working with a property management company is the best bet to avoid scams or see them coming in advance.
Common Rent Scams to Identify
Finally, we get into the nitty-gritty of the fraudulent world. Let’s take a look at common rent scams.
Money Wiring
This is the oldest trick in the book and most landlords are aware of it. A landlord will receive a rental application from somewhere overseas.
If the renter has been accepted, they would send a certified check, but they would send more money than needed and request the overpayment to be sent back ASAP.
The initial check has been forged but will ttakeweeks to bounce. While this happens, a landlord loses the money they wired overseas and that’s that.
That’s where technology comes in. Nowadays, there’s really no reason to have your renters pay in checks. Use an online portal to make sure you get all of the payments each and every month, instead of having the wool pulled over your eyes.
Forged Pay Stubs
If you choose to ask for proof of employment, and the renter shows you the stubs, would you think they were forged?
This rent scam often is overlooked, as nobody expects forged official documentation. However, these documents can be bought online, and provided to you without further notice. The renter might have no job, or a lower-paying job and you would not know any better.
If you ask for stubs, always ask for references to support them. Call the references, and verify the renter is an employee at the company.
Subletting to Third Parties
This type of scam negatively affects the landlord and the third party who has been found a victim to the scam.
Someone who rents your property will pay rent for a couple of months, then fail to do so again. After a short while, you get tired of this and go to check in the renter.
When you arrive, you’ll find someone else living there who has been paying for 5 months to somebody else. By the time both of you figure it out, the fraudster is gone with the wind and looking for their next gig.
The subletter is out of money and will most likely no longer pay for the property. Even if you were to have a no-sublet clause in the agreement, it wouldn’t stop anyone from performing this type of scam.
Keeping Rent Scams Under Control
Now that you know how rent scams come to be, how to detect them, and in what shape and form they are most seen, you are well on your way to getting your property under control.
Albeit, this can still be difficult on your own, so it’s best to work with an experienced property management company that can help you will all of your landlord needs.
If you’re interested in working with Genuine Property Management, we will happily accommodate your needs.
Get in touch with us now.