As a multifamily property manager, there’s no question that you need systems in place that can help you stop property management fraud before it happens. After all, whoever originated the phrase “there’s no such thing as bad publicity,” clearly never saw his or her property on the 6 o’clock news under a headline of “FRAUDSTER EVICTED AT LOCAL APARTMENT.”
Fraud occurs across many industries, and multifamily is no exception. The majority of property managers become aware of fraud in their community within the first six months after the resident moves in. Addressing the situation can lead to eviction, disputes, and a bad reputation for your apartment community. It’s crucial to understand the ways in which fraudsters can sneak their way into your properties and how to prevent them from doing so.
What is multifamily rental fraud?
When a prospective renter completes an application for an apartment using false information, this is considered rental fraud. The property leasing office is responsible for evaluating the application and determining if the information is valid. Insufficient screening processes can result in fraudulent residents living in an apartment community for free, or on someone else’s dime.
What rental fraud might look like
Forged documents, missing information, and identity theft are key pathways that fraudsters can use to get into your multifamily community. While some of these vulnerabilities may seem like relatively small access points, ApartmentList actually estimates that 5.2 million renters in the United States alone have lost money due to rental fraud.
Presenting fake documentation is a common tactic that fraudsters use as part of the apartment application process, particularly regarding paystubs. Did you know that “fake paystub for apartment” is such a high-volume search term that it shows up in Google’s Autofill feature? While some fake documents might fall on the “unbelievable” side of forgeries, others are quite convincing and reasonably difficult to detect. Even face-to-face interactions with applicants could be fraudulent, and as such, it’s important that your property prepare for these situations by updating your resident screening systems and training your leasing staff to spot fake documents.
In recent years, the application process for multifamily prospects has largely moved online, and fraudsters have come to take advantage of this. Without the proper systems in place to verify identity, your property could end up with leases signed by non-existent residents. These residents could be people who have had their information stolen, or they could be entirely made-up people, created for the sole purpose of building credit and passing as someone else.
How to prevent property management fraud in your multifamily community
Stopping fraud before it happens is based almost entirely around recognizing flags at the leasing level, to prevent fraudsters from moving in to your community. The best way to pick up on “red flags” that may signal fraud is to add multiple layers to the fraud detection processes. Here are a few things to be on the lookout for:
1) Duplicate addresses – Some fraudulent applications may have the same address used on multiple applications. Recognizing these duplicates can help you stop a fraudster before it’s too late.
2) Questionable personal information – Credit reporting agencies can be used to look up prospects, cross-reference the application data, and verify their cell phone number against carrier information. If a fraudster has used a burner phone number on his or her application, this check will reveal any discrepancies between the number and the affiliated carrier.
3) Verified rent payments – Reporting rent payments to credit bureaus can help leasing staff cut down on fraudulent activity by incentivizing good behavior. Fraud is less likely to happen if renters know that their rent payments are having a positive impact on their credit history.
4) Multiple credit card uses – If the same credit card has been used on multiple rental applications, and by multiple people, this is a red flag that warrants further investigation.
Catch fraud before it happens with resident and tenant screening
No matter what action you take to defend your property against fraud, it’s vitally important that you make sure your solutions are reasonable. Catching fraud before it happens is crucial to the reputation and upkeep of your multifamily property, but overly cumbersome processes can also drive resident satisfaction lower amongst renters who are following the rules.
At MRI Software, empowering property managers and other real estate businesses is at the core of what we do. To help identify rental fraud, MRI offers a range of resident and tenant screening products, including Resident Check, that can help you keep fraud out of your multifamily complex. Plus, through MRI’s Partner Connect network, you can access screening solutions from our many partners and choose the solution that works best for your business.