The Rising Threat of Fraud in Multifamily Leasing

Fraud in multifamily leasing is a growing challenge for property managers. From fake pay stubs and forged IDs to false references, fraudulent applications can cause significant financial losses, legal complications, and operational inefficiencies.

In fact, according to the National Apartment Association, nearly 97% of multifamily professionals have encountered fraudulent rental applications in recent years. As fraudsters become more sophisticated, the need for robust verification processes has never been greater.

This e-book provides an in-depth look at fraud in the multifamily industry, the risks it poses, and the tools and strategies property managers can use to protect their businesses.

Understanding Fraud in Leasing

Fake IDs: High-quality forgeries that bypass visual checks.‍

Falsified Income Documents: Pay stubs, bank statements, and tax forms manipulated to inflate income.‍

Identity Theft: Stolen identities used to apply for leases.‍

Employment Verification Scams: Fake employers or altered employment history.

Each of these fraud types poses unique challenges, but the end result is often the same: leasing to unqualified renters who may default on payments or engage in illegal activities on the property.

The Cost of Fraud

Fraud impacts multifamily properties in several ways.

Financial Losses: The cost of evictions, unpaid rent, and property damage can run into the tens of thousands per unit.

Operational Inefficiency: Fraudulent applications waste valuable time and resources.

Reputation Damage: Leasing to fraudulent tenants can create safety issues and harm a property’s reputation.

Legal Risks: Noncompliance with Fair Housing regulations or local laws can result in penalties and lawsuits.

For example, one case study showed that a multifamily property lost over $50,000 due to a single fraudulent tenant who provided falsified income documents.

Common Red Flags in Rental Applications

While fraudsters are becoming more sophisticated, certain red flags can still help property managers identify suspicious applications:

• Inconsistent or incomplete information on the application.
• Employment details that can’t be verified through reputable sources.
• IDs that look “off,” such as mismatched fonts or altered photos.
• Bank statements or pay stubs with signs of manipulation, such as blurry text or inconsistent formatting.

Solutions for Fraud Prevention

The best way to combat fraud is to adopt modern verification tools and processes. Here’s how to stay ahead:

• ID Verification: Use tools that verify IDs against trusted sources like the DMV and incorporate biometric matching to ensure the ID belongs to the person presenting it.
• Income Verification: Partner with services that verify income directly with payroll providers or financial institutions to confirm the applicant’s financial stability.
• Employment Verification: Go beyond phone calls to references by using trusted databases to verify employment status.
• Integrated Platforms: Centralized verification platforms, like Umbrello, streamline the process by combining ID, income, and insurance verifications into a single solution.

Conclusion: The Future of Multifamily Fraud Prevention

Fraud is an unavoidable challenge in today’s multifamily industry, but it’s not insurmountable. By understanding the risks and implementing the right tools, property managers can protect their properties and streamline leasing operations.

Umbrello's solutions are designed to meet the evolving needs of multifamily professionals, providing the speed, accuracy, and peace of mind you need to stay ahead of fraud.