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Turnkey Real Estate Investing

5 min read

5 Proactive Strategies to Prevent Rental Fraud

Tue, Sep 13, 2016

rentalfraud-propertysecurity.jpgThis is an article that we originally published on BiggerPockets.com and have revised and updated here for our readers.  It is such an important topic for real estate investors and we realize that many of our readers are also active real estate investors and landlords.

Rental fraud is real and is something that we all have to be aware of and prepared to deal with.  It comes in many forms and really requires us to be diligent not only as landlords, but even as property management companies.

Rental fraud. It’s not fun, and reports of it happening have seemed 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?

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.

When they’re inevitably found out, the unfortunate (but still illegal) tenants must be removed and you’re left to 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.

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!

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 that need multiple security systems for their properties, smaller companies may be willing to negotiate with you since a large account would be a big deal for them. For you, 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 should, 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—without 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.

5. Watermark Your Photos

Want to avoid fraud and false listing 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.

Another way to prevent fraud is to rely on a trusted, experienced property management team.

That’s why we don’t just focus on selling turnkey properties: we offer Premier Property Management that will take your investments to the next level.

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Chris Clothier
Written by Chris Clothier

Entrepreneur, writer, speaker, ultra-endurance athlete, husband & father of five beautiful children. Chris puts these natural talents on display every day. As a partner at REI Nation, Chris addresses small and large audiences of real estate investors and business professionals nationwide several times each year. Chris is also an active writer, weekly publishing real estate, leadership, and endurance training articles.