How to Avoid Rental Scams
Rental property owners, listen up. We have a really, really important message for you.
Property management has a black eye as a business. You don’t have to look very far for people that are skeptical of the way their property management company operates, and you certainly have a pretty high risk of being scammed. It’s a fact, most people hate their management company, and rightfully so, because most of them flat out stink.
But why are we here today, what’s our message? Just in the past year or two (2015/16), we’ve seen a massive surge in rental scams.
Unfortunately, rental scams are incredibly easy to pull off. Property management is a business of moving around a lot of money, for a lot of different reasons. There’s plenty of profit centers for these companies, and more than plenty of ways they can take advantage of unsuspecting owners.
So what’re we talking about, and are we just blowing hot air to make ourselves look good? Of course not, we’re here to educate so property owners can make sure you and your property are being well taken care of, and that you feel you are comfortable with your current property management company.
Before we get into the type of scams we’re familiar with, it’s important to explain we only know about these by personal investigation, and from clients that have experienced these rental scams for themselves. Certainly not from personal experience!
So What Are the Scams?
Undoubtedly, the biggest area that scamming occurs in in property maintenance. This is where most of the money is spent and requires a great level of trust. If your management company says your A/C system needs a full replacement, do you trust them? How do you know it’s really the case?
Here’s how it works: Let’s say you take the leap of faith and pay the $4,500 for a new system. You send a check so the property manager can send the vendor out to complete the work, but they never actually do so because the A/C was actually never broken in the first place.
Woah, so now you’re out almost $5,000 just to put some extra cash in their pockets.
“But wait a minute” you’re thinking, “how the heck can I make sure this hasn’t happened to me?”.
It’s pretty simple. When the A/C system supposedly stopped working, can you access a copy of the tenant repair request, signed by them? Do you have a copy of an estimate where a real, licensed and insured vendor went out to diagnose the issue? Did the management company send out at least two vendors to get a second opinion on the big repair? Did they send you pictures when it was completed, so you can see the new system?
If you’re answering no to those questions, that’s a pretty bad sign.
We’ve had many new clients tell us recently they experienced something like this, in some sort of capacity.
Sadly, it doesn’t stop there.
We’ve also heard of property managers keeping security deposits for themselves by telling the property owner the house was left in perfect condition and the tenants will be getting back the full amount of their deposit. Meanwhile they patch the property up in a half-a**ed manner, and keep the money for themselves. Security deposits are over a grand in most instances. Imagine doing this with 200 properties, that’s some serious cash.
And it keeps going…
Have you ever thought how easy it would be for a property manager to tell a property owner the home is rented for $1,000 when they’re actually collecting $1,200 and keeping the spread? Imagine doing that on 200 properties on top of the management fees they’re already legally collecting?
Well, that happens too.
But the real question is, why? Why are people doing this?
Well, the obvious answer is money. But why have rental scams recently been so rampant?
There seems to be a correlation with the general sales market and rental scams. When the sales market takes a dip in activity, you suddenly have thousands of realtors getting desperate to make a living and their answer is usually to switch to property management. Little do they anticipate how difficult it is to run a fair and honest property management company and make a living at the same time. The nature of the business calls for so many moving parts, it’s impossible to stay on top of it all in an honest manor without the right quality and quantity of staff in place.
So you have a dip in the sales market, all of sudden a bunch of fly by night companies pop up, get a solid base of properties they manage and that’s when most either nickel and dime their clients to death to stay afloat, or they resort to the scum of the earth, and outright scam and take advantage of their clients.
That’s not to say every company is like this, but, being in the business for over 3 decades, it’s never been this bad. We’re never not surprised at the new and creative ways people are getting ripped off.
All we can do is try and explain the warning signs and help educate those who may suspect rental tricks and scams. If you’re ever suspicious of what’s going on with your management company, we’re always happy to take a look and do some investigating and give some piece of mind.