Rental Fraud: 3 Ways to Avoid Being a Victim

February 26, 2024

Operations & Technology Featured National

Incidents are spiking, and they are both costly and disruptive for multifamily communities.

A few years ago, Jo Trizila was the victim of identity theft.

What happened to Trizila, the president of TrizCom Public Relations in Dallas, wasn’t unusual. After all, according to the Federal Trade Commission, there were more than 1 million reports of identity theft received in 2023 through the FTC’s website.

But Trizila’s experience is every landlord’s nightmare: Her identity was used to rent $950,000 worth of apartments in Atlanta, all of which ended up in collections because the purported renters were fraudsters.

According to a survey released in January 2024 by NMHC, rental housing providers have experienced staggering amounts of fraud, contributing to both increasing rents and evictions. Nearly all (93.3 percent) of the respondents to the survey, conducted between Nov. 15, 2023 and Jan. 9, 2024, experienced fraud in the past 12 months. Of those who experienced fraud:

84.3 percent have seen applicants falsifying or fabricating pay stubs, employment references or other income documentation
80 percent observed prospective renters misrepresenting information on applications
70 percent reported identity theft, fraudulent ID documents or use of another individual’s personal information
62.9 percent reported the use of fraudulent checks or other payment methods

Many of the survey respondents called out Atlanta—where Trizila’s identity was falsified—as a jurisdiction where increases in fraud were most concentrated.

“Their courts are backlogged,” said Caitlin Sugrue Walter, Ph.D., NMHC’s vice president of research. “Folks know that if you access a unit through deceptive means and get approved, even if they file an eviction, it’s going to be quite a while before the case is actually heard in court.”

The result of all this fraud: 23.8 percent of the survey respondents’ eviction filings were linked to fraudulent applications and the related failure to pay rent over the past three years.

“Fraud is one of the No. 1 problems in the rental industry right now, and it’s only getting worse,” said Alissa McClard, director of asset management for Bristol Development Group in Franklin, Tenn. “There are tools out there to help prevent it, but for every tool that’s created, there’s an equally smart human coming up with a way to trick the system.”

So, what can apartment owners and operators do to prevent becoming the victim of rental fraud?

1. Tap technology

Technology is both a blessing and a curse, observed Michael H. Zaransky, managing principal of MZ Capital Partners in Northbrook, Ill. While technology makes it easy to apply remotely and upload documentation online, “it’s also available to people who have bad intentions who can make phony W-2 forms, phony pay stubs to prove income that doesn’t exist and, even worse, to make phony IDs.”

One prospect at The Residences at Devanshire, a single-family rental community in Knoxville, Tenn., refused to complete an application on-site, saying they would rather do it online, Zaransky said. But when the documentation came through, the employer name on the W-2 was different than what the person had first indicated. After calling that company’s human resources department, the leasing staff learned the prospect never worked there. “We headed it off at the pass,” Zaransky said. “Since then, we’ve been very cautious to call to verify employment.”

Many companies, such as Yardi, offer technology solutions to help fight fraud and mitigate risk. “Housing operators are looking for solutions in two main areas: verifying applicant identities and verifying applicant incomes,” said Patrick Hennessey, vice president of Yardi’s RentGrow screening business.

Bristol uses two technology products to prevent fraud, McClard said. One is CheckpointID, which verifies IDs and helps stop fraudsters before they even tour a property. The other is Snappt, which scans documents from more than 2,000 financial institutions and is claimed to catch 99.8 percent of edited documents.

At The Collective, a community in Richmond, Va., out of 75 recent applications that had documents reviewed, Snappt picked up four that were accompanied by edited PDF files, McClard said. “Snappt has been worth every penny,” she said. “We haven’t had a single eviction at The Collective since we opened last May, which is pretty good for a lease-up community.”

David Dweck, the owner of a portfolio of single-family rental homes in Florida and the Carolinas, said that during his 34-year career, he’s seen attempts at fraud, but no one has slipped through the cracks. While he also screens applicants carefully, he relies on an app called FOREWARN, which provides real-time verification of an individual with as little as a phone number. The app can verify identities, identify criminal history, confirm financial data and validate assets.

2. Don’t forget tried-and-true practices

While technology can be an invaluable tool, sometimes old-school techniques work best.

For example, Dweck either personally meets with each applicant or has a representative or manager meet them to verify who they are. “If you’re going to rent to them, you have to have a face to face,” he said. “There are ways of telling if people are not telling the truth.”

Another tip is to slow down. “It’s exciting to get an application when you’ve gone a few days or weeks without receiving anything,” said Louie Colella, vice president of leasing and operations at CRG in Chicago. “But it’s better to take your time, be diligent and review everything than to let your guard down and allow someone who could be trying to commit fraud into the building.”

Denny said that human touch is why the company has minimal fraudulent activity. The last example of attempted fraud he can recall is two years ago, when an applicant used a fake ID and social security number on an application for an apartment at Emerald Point Apartments in Virginia Beach and then went from one of the company’s properties to another in an attempt to fraudulently secure an apartment. “Luckily, with all the measures we have in place, we were able to prevent her from moving in, so we dodged a bullet,” he said.

3. Keep up

It’s essential to keep up with the latest scams and fraud taking place in the industry. One way to do that is to attend industry conferences, such as NMHC’s OPTECH, where you can network with other multifamily professionals and learn about products to help prevent fraud.

“There are a lot of folks who exhibit at our OPTECH conference, and we have sessions where you can learn how to prevent it,” said Walter. “It is a staggeringly difficult problem.”