You’re smart. You’re an experienced landlord. You always do your research. So you’d never fall for a real estate scam, right?
Real estate fraud, including rental scams targeting landlords, happens to even the most experienced landlords. Con artists come up with new ways to swindle unsuspecting property-owners on a regular basis. They might scour the internet looking for victims. They might advertise false services hoping to rip-off a trusting person. Professional scammers can be very sophisticated and creative – they do this for a living. They want your money and will work hard to get it.
If you don’t want to be a victim, here are five tips to avoid rental scams targeting landlords.
Tip 1: Beware Of the Too-Good-To-Be-True Tenant
One common real estate scam is the too-good-to-be-true tenant.
She has a well-paying job, is polite and well dressed. She always seems to have the right answer to your questions. She’s willing to move in right away. She’s ready to give you a large deposit with her application. She even offers to pay more than you’re asking for rent to make sure she gets the unit.
Sounds too good to be true? It’s probably tenant fraud.
Some con artists operate as professional renters. They know how to abuse the system, in order to live rent-free while landlords are stuck trying to get them out. After paying their initial deposit, you’ll likely never see another payment. Professional renters may even damage your property themselves and claim the unit isn’t in good livable condition, extending their free stay while they fight you in court.
Your best defense against these problem tenants is to do your due diligence. Never lease to a tenant without verifying their identity. Carefully screen every adult who will be living in your property. Do a credit check and a criminal background check. Call applicants’ former landlords and employers.
Scammers posing as good tenants tend to prey on landlords who seem unexperienced, trusting or don’t use professional property managers, hoping for an easier target.
Tip 2: Be Aware Of the Fake Landlord Scam
A second serious tenant fraud is when a renter poses as the unit’s landlord. These impostors often rent a unit using a stolen identity and pretend to move in. What they really do is advertise the apartment online, posing as the landlord. They show the unit to as many people as possible, “renting” it out to everyone who is willing to leave a deposit and pay first and last month’s rent. The scam artist then vanishes with the money, leaving the real landlord with quite the nightmare.
To not get caught with this scam, take your time when screening all potential tenants. Carefully compare all background checks, IDs and application forms and look for details that don’t match up. Don’t ignore something that seems off – taking the time to investigate beforehand can save you lots of time, headaches and money later on.
Tip 3: Never Pay Contractors Upfront In Full
Another common real estate scam happens when a crooked contractor asks to be paid in advance, and then disappears without doing the work. Contractor fraud happens so often that many states now have regulations specifically to avoid these scams. You shouldn’t pay more than 10 percent or $1,000 up front to a contractor, which is now law in many states.
Luckily, there are many reputable, professional contractors out there. To help you choose a contractor with a good reputation, talk to neighbors and other landlord to see who they work with. Double-check that the contractor is licensed and insured. Contact the Better Business Bureau to see if any former customers have filed a complaint, and check prior client reviews on AngiesList.com.
Tip 4: Be Wary Of the “Unforeseen Problem” Contractor
Yes, once a renovation starts, there’s bound to be some unforeseen issues. However, beware of fraudulent contractors who may tear apart your rental property, only to stop due to huge “unforeseen problems”. Giving him more money, of course, will solve those problems.
Before forking over your money, get a second opinion. Make an effort to be present during the renovation whenever possible to deter dishonesty. Construction fraud is more difficult to carry out when the landlord is onsite regularly.
Tip 5: Always Report Fraud
Hopefully you’ll never get caught in a real estate scam. If you do, always take the time to report the fraud. By notifying the authorities, you may one day get your money back. You may also help stop the scam artist from stealing from other unsuspecting homeowners and landlords.
Have you ever been victim of a real estate scam? Please share your best tips to avoid fraud.