In this week’s podcast, Andrew Schultz discusses the latest fake landlord scam to hit the market. Make sure to warn your tenants!
How do you go about a lease that’s technically for a guest, but it’s not necessarily subletting? Find out now.
And, last, but not least, what happens when a landlord gets along with their tenants, but the tenants don’t get along. We’ve got just the answer! Listen in now.
Show transcription:
Andrew Schultz: (00:00)
Hey everyone. Welcome back to another episode of the Rent Prep for Landlords podcast. This is episode number 423 and I’m your host, Andrew Schultz. On today’s episode, we’re gonna be talking about what to do when tenants are fighting fake application paperwork, and should you worry about your tenants guests. We’ll get to all that right after this.
Voice Over: (00:24)
Welcome to the Rent Prep for Landlords podcast. Now your host, Andrew Schultz.
Andrew Schultz: (00:29)
Before we get into today’s episode, don’t forget to check out the Rent Prep for Landlords Facebook group. We’re up over 14,000 members at this point and growing our group members get access to our Sherwin Williams and PPG Paint Discount Programs can ask questions in our monthly AMA sessions and much more. So if you have a question or a situation that you’ve never encountered or just need to bounce an idea off a large group of housing providers, this is the place. If you haven’t checked it out yet, do it today over at facebook.com/groups/rentprep. Don’t forget to mention the podcast when answering the questions so we know how you found us
Voice Over: (01:08)
Forum quorum, where we scour the internet for ridiculous posts from landlords and tenants.
Andrew Schultz: (01:17)
We’re gonna kick things off with our forum quorum segment. We’re gonna go ahead and jump right in here. I have a home where I rent out two individual rooms with each tenant having a separate lease. One of the tenants moved in and is not a fit with the other two tenants. In terms of lifestyle, I wanna accommodate the previous two tenants because they’ve coexisted for years and the new tenant is the issue. However, from my side, the new tenant hasn’t done anything that violates the terms of the lease other than being a bad roommate and has paid their rent on time. How should the tenants handle the situation of asking him to leave and what if he doesn’t violate anything in the lease? Thank you in advance, and this was actually a right into the Rent Prep website, so renting individual rooms can be a real challenge for reasons exactly like this.
Andrew Schultz: (02:01)
We actually just released a three-part series on house hacks that may be interesting to anyone who finds themselves in a similar situation or anyone who’s interested in financing and operating a house hack. That’s available over on our YouTube page at youtube.com/rentprep. But I wanna get back to the question at hand here. So you have two long-term renters and one new renter that isn’t really getting along with the existing tenants, but from your perspective as the landlord, there are no issues that cause the new tenant to be in violation of the lease. Essentially, it’s currently a tenant-to-tenant dispute. My standard advice for tenant-to-tenant disputes is to tell the tenants that they need to communicate like adults and come to an agreement jumping into the middle of a tenant dispute as the landlord puts you in a position where you’re potentially choosing sides and there’s a good chance that someone’s gonna wind up unhappy with that decision if the new tenant were doing something illegal or threatening the other tenants or becoming physically aggressive at that point, it’s time for police intervention.
Andrew Schultz: (02:57)
Landlords are not police officers and we don’t need to be out acting like one. That’s the type of situation where you could be seriously injured or killed. It’s happened before and I guarantee it’ll happen again. At that point, you would at least have a reason to break the lease and evict the tenant, let the police handle the situation. You don’t need to get involved. But let’s assume for now that this is mostly just a verbal disagreement over house rules or something like that. Maybe the new tenant doesn’t do their dishes in a timely fashion and it annoys the other tenants, something along those lines. This is something that the tenant should be ironing out amongst themselves if they can’t or won’t figure it out on their own. You may need to step in at as the landlord at some point, but my recommendation is to try to avoid getting into it at all if you can.
Andrew Schultz: (03:41)
If you do need to get into it first, listen to both sides of the story so you can get a feel for what’s going on. There’s always side a story, side B story, and what actually happened. It’s probably a good idea to do this one-on-one so that you can actually get the story from each side without someone trying to scream over the other person or something like that. Document what you’re being told as well as anything else relating to the situation. Photos or videos of tenant concerns, notes from your conversations with both sides, everything, it’s better to have more information than less information and circumstances like this. This will also help you down the road if you need to move forward with an eviction to show that attempts to have been made to resolve the issue and that those attempts were unsuccessful. That said, the goal here isn’t necessarily for you to resolve the issue, it’s to lead the tenants to a point where they can resolve it between themselves.
Andrew Schultz: (04:31)
So listening to both sides and getting them to communicate with one another will go a long way in helping to resolve whatever the issue might be. If there are law or lease violations taking place at the property, document them follow up by issuing the tenant violation letters to the tenant, causing the violation with clear guidelines on how to correct and when to correct buy. In. Some states you have to provide a certain amount of time for things like this in other states, you can dictate it in the lease itself or even in the violation letter. So check your laws on that and if you get to a point where violations are not being resolved, you now have a potential path to eviction. If there aren’t any lease violations going on, you may just be in a situation where two people don’t like each other and are going to complain about anything that the other person does.
Andrew Schultz: (05:16)
Some things cannot be fixed, some people will just never get along In situations like this where it’s just complaining, log the complaint, encourage them to resolve it directly with the other person, and move forward. When the leases come up for renewal, it’ll be a good time to make some decisions on who stays and who goes. The main thing here is to document everything fully and follow up, log your conversations, your phone calls, your emails, et cetera with regards to the tenant complaints. Even if resolution between the tenants is not reached, you can follow up with letters to both tenants documenting the situation thus far and reiterating that they are expected to resolve the situation themselves and to contact management once a resolution has been reached. Good luck. I understand that these can be very, very challenging situations. They’re not easy to deal with and I hope that you’re able to resolve it.In our in the news segment. This week we’re gonna be taking a look at a news story coming out of the National Multifamily Housing Council. This was written by Colin Dunn. Title of the article is Rampant Increasing Fraud Impacting Rental Housing Costs. Let’s go ahead and jump right in here.
Andrew Schultz: (06:21)
Throughout the country, incidences of rental application, financial and identity fraud are on the rise and fueled by social media. Results from a groundbreaking news survey of rental housing providers have revealed staggering increases of fraud contributing to both growth in rents and the number of evictions. A vast majority of respondents, 70.7% reported experiencing an increase in fraudulent applications and payments utilize utilizing fraudulent documentation, financial statements, and even identities in the past 12 months, driven in part by the social media platforms such as TikTok and Instagram. The rise in false rental housing applications is exacerbating rental costs, fueling the housing affordability challenges facing communities across the country and undermining the credibility of eviction data. These fraudulent incidents consist of a wide range of wrongdoing including criminal behavior. One of the most notable findings in the survey was the share of evictions tied to fraudulent applications with respondents reporting that on average 23.8% of their eviction filings were linked to fraudulent applications and related failure to pay rent over the past three years.
Andrew Schultz: (07:27)
This in turn leads to higher costs for rental housing providers and ultimately the renters that they house. The average respondent was required to write off nearly $4.2 million in bad debt over the past 12 months. Respondents reported that approximately a quarter 24.5% of this bad debt on average could be attributed to non-payment of front due to fraudulent applications. There has been anecdotal evidence of the rise in fraudulent activity over recent years, but now we have clear evidence of the staggering impact of these crimes on the rental housing market. sad National Multifamily Housing Council President Sharon Wilson, Gino. While most runners are honest, those who are not are causing the cost of rental housing to increase for everyone additional delays in many jurisdictions in the lease enforcement process, even when there’s clear fraud incentivizes bad actors, and that means that this illegal behavior costs the responsible renters even more.
Andrew Schultz: (08:21)
We call on lawmakers and courts to take action that will address this problem. This new survey of rental housing providers conducted by the National Multifamily Housing Council found that nearly all respondents, 93.3% reported experiencing fraud in the past 12 months. Of those who experienced fraud, 84.3% had seen applications falsifying or fabricating pay stubs, employment references, or other income documentation. 80% observed prospective renders misrepresenting information on applications, 70% reported identity theft, fraudulent ID documents, or use of another individual’s personal information, 67% experienced unauthorized co-inhabitants, illegal subletting or other actions to evade the application or leasing process, and 62.9% of respondents reported the use of fraudulent checks or other payment methods. Respondents who observed an ac an increase in fraudulent applications and payments reported a 40.4% average increase over the past 12 months. 67% of those who experienced an increase in fraudulent applications and payments said that this varied by jurisdiction and many called out Atlanta specifically as a jurisdiction where increases in fraud were most concentrated. The data for the survey was pulled from a survey conducted by the National Multifamily Housing Council as well as the National Apartment Association. The survey was run from November 15th, 2023 through January 9th, 2024, and the respondents represent 75 leading apartment owners, developers, and managers.
Andrew Schultz: (10:03)
So the first thing that I wanted to mention is the last sentence that I just said there, and that is that this was a survey of 75 large-scale housing providers. This is not mom and pops, this is large-scale housing providers. We’re talking about 75 respondents, and based on the information there, you can tell that it’s all gonna be large operators. It’s not necessarily the mom and pops, but that doesn’t mean that we’re not experiencing the same thing at a small scale. I can tell you firsthand is the owner-operator of a real estate brokerage that is predominantly involved in the property management industry. That fake application documents have become so much more prevalent in the past year or so as compared to the recent past. We actually put a video up on the rent prep YouTube page talking about spotting fake pay stubs where we actually go through the process of creating a fake pay stub.
Andrew Schultz: (10:50)
It’s right there in the video. It’s remarkable how simple it is at this point and landlords need to understand that just because it’s on paper does not mean that it’s true. In 2023 off the top of my head, I remember receiving several different fake pay stubs, some of which were pretty obviously faked and some of which were very, very convincing. I recommend using an income verification service going forward that will directly connect to the applicant’s bank account and verify the actual income received. Of course, if the tenant isn’t bankable, that isn’t an option and some states may require you to consider any lawful source of income, so make sure that you’re following your state laws if you decide to use a service like that. We also received a fake W nine, which was the first time in a long time that I’d received a fake tax document to try to verify income.
Andrew Schultz: (11:37)
It was pretty easy to determine as fake. However, because the applicant couldn’t provide a copy of their taxes as filed, so we really couldn’t verify their income and we couldn’t verify the validity of the document. We’re so far past people using fake IDs at this point that it’s crazy and I think that this is something that’s going to continue to be an issue going forward. There’s no stopping people from generating fake pay stubs at this point or any other fake document, and it’s up to you as the housing provider during the screening process to separate the truth from the lies and determine if someone is actually qualified to rent your apartment. So make sure your skills are sharp and that you’re doing your due diligence because once you turn that property over to the tenant, there’s no getting it back without a lengthy legal process.
Voice Over: (12:19)
Water cooler wisdom Expert advice from Real Estate Pros.
Andrew Schultz: (12:28)
Our last segment of the day is our water cooler wisdom, and this one comes to us via the Rent Prep for Landlord’s Facebook group. Let’s go ahead and jump in. What are renter/landlord rights around having guests stay when the renter is not home? As an example, my friend is going to come stay at my place while I’m on vacation. In California, it’s common to have clauses in your lease regarding how long a guest can stay and how many days a year guests can occupy the house. We also have subletting clauses, but this question seems to fall somewhere between these. Any input or resources are appreciated, and again, this one comes via the Rent Prep for Landlords Facebook group. So there are two main schools of thought on this. The first school of thought is that as long as the tenant is paying the rent and the unit is being cared for and not destroyed, the landlord’s not gonna worry about the coming and going of guests.
Andrew Schultz: (13:16)
The other school of thought is that guests are a concern that need to be managed in some way so that they don’t turn into squatters or additional occupants. Before you decide which group you fall into, I encourage you to do some research on your state laws. Many states will define the term tenant as well as the term occupant or additional occupant. They will also lay out what you can and can’t do. When it comes to a tenant’s guests, for instance, your state may say that you can’t prevent a tenant from adding additional occupants or your state law may say that immediate family of the tenant is exempt from guest rules. Typically, your state laws or building codes will also define occupancy limits as well, so it’s worthwhile to understand all of the various laws surrounding how many people can live in the space and what restrictions you can and can’t place on occupancy as a landlord.
Andrew Schultz: (14:02)
In some states, the occupancy limit may be the only thing that stops a tenant from overcrowding an apartment. Depending on the laws in your state, there may be certain key items that additional occupants can do to be considered residents of the unit. A very common one is living in the place for a certain amount of time, oftentimes over a month. Another common one is receiving mail at that address or establishing a utility account and their name at that address. So based on what your state law says, you may need to act quickly if you’re trying to prevent guests from becoming tenants. Our lease states that immediate family may occupy the unit without penalty if someone not listed on the lease occupies the premises. Beyond the time allowed by law, an additional rent of $150 per occupant per month is charged until they move out. Our lease also states that guests are responsible for all of the same rules that tenants are responsible for in their lease, and the tenant is responsible for guests at all times while they’re on the property.
Andrew Schultz: (14:59)
Our lease also specifically states that guests have no rights of tenancy. Adding another occupant is possible, but they need to be screened and approved by management. One of the main challenges you’re going to face when trying to manage guests and additional occupants is proving that they’re actually living in the unit. If this is something you wanted to pursue in court, you’d have to bring evidence proving your case. You likely aren’t going to be able to prove with 100% certainty that someone is living there without going through some serious investigative work, but there are some things that you can watch out for. The first thing I would do would be start by just asking the tenant if they have someone else living with them, they may explain what’s going on and then you can course correct with a tenant as well as screen and add the guest as an additional tenant if need be.
Andrew Schultz: (15:42)
You may not get the full truth here or any truth at all, but depending on your tenant and your relationship with them, you might find out that this is all you need to do. If there are vehicles at the property that don’t belong to the tenant, that generally indicates that guests are present, but proving that they’re staying overnight is obviously a little more challenging. Are you going to sit outside the house and wait for them to come home and make sure that guests stays there all night for multiple weeks to make sure that they’re living there? No, probably not. If you’re paying for utilities on the property and see a spike in usage, this could also be an indicator that there are additional occupants in the home. If you suspect additional occupants, I’d schedule an inspection of the unit so that you can walk through and check for signs of additional occupants.
Andrew Schultz: (16:22)
More beds than usual is a good indicator. Hygiene items enclosed generally aren’t a great indicator as those can be left behind for use on an occasional overnight or weekend, and honestly, tenants can be very, very good at hiding additional occupants or the signs of additional occupants. Whatever you do, make sure that you document your findings along the way. Photos, texts, letters, whatever you find should be saved as you’re building a case and determining next steps. If you discover an additional tenant, handle it as the lease violation following the requirements in your state. Again, this is typically not going to be an easy thing to prove and it could become very, very time-consuming as you try to figure out what’s going on. Best of luck to you as you sort out the situation. Are you ready to rent out a room in your home? In our latest guide, we’ll instruct you on how to turn a profit while finding and living with an awesome tenant.
Andrew Schultz: (17:11)
Check it out today over at rentprep.com/blog. That pretty much wraps it up for this week’s episode of the Rent Prep for Landlords podcast. Thank you all so much for listening. Our goal with the podcast is to help as many people as possible make educated decisions when it comes to real estate and you can help us to reach our goal. If you heard anything in this week’s episode or any of our other episodes that will help someone you know, do us a favor and share it with them. If you’re looking to get in contact with me, I can be reached over at whatsdrewupto.com. From there, you’ll find links to everything going on with me over at Own Buffalo, as well as some of the other projects that we’re working on. Grab a copy of our free deal analysis tool today over at whatsdrewupto.com.
Andrew Schultz: (17:53)
There’s no obligation and it comes with a companion video showing you how to use it. If you’re looking for top-tier tenant screening services, head on over to rentprep.com. There are multiple products to choose from, including tenant-paid options, and if you’re over 50 doors, ask about the enterprise-level programs and pricing. I’ve been an enterprise user of Rent Prep for over a decade now, and it’s absolutely changed the way that we screen our tenants. Check that out today over at rentprep.com. Again, thank you all so much for listening. We’ll be back next week with an all-new episode that you won’t wanna miss. Until then, I’m Andrew Schultz with ownbuffalo.com for rentprep.com, and we’ll talk to you soon.
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