How to Protect Your Investment and Avoid Rental Application Scams as a Property Owner in DC

Red Flags

There’s a handful of requests and behaviors that should probably trigger a red flag for you as a rental property owner. 

Tenants who refuse to abide by your screening process or won’t answer clarifying questions about their application likely have something to hide. You should always give an applicant time to provide additional information when needed. Plenty of folks have uncommon or more complex income situations, such as students, gig workers, contractors, or government employees with per diems. You are obligated to accept all forms of income, per DC’s fair housing laws. But, an applicant who isn’t forthcoming about how they get paid and how they’ll be paying rent is an obvious red flag.

Alternatively, renters who offer to pay for a lease upfront or want to put money down to “hold the unit” should also raise a red flag. It’s up to you whether or not to accept these offers, but you should absolutely decline until the applicant is approved. If someone can pay the rent for 12 months upfront, but can’t provide income to meet your requirements, you need to ask how they’ll be paying for utilities, renter’s insurance, and any other expenses they are responsible for. There may be situations where this works out well for all parties, but we encourage you to do your diligence before moving forward.

Applicants who have negative rental history should also set off the alarm bells. In a sense, rental history is actually the most important factor to look at. A tenant who comes with glowing recommendations from verified sources is always ideal, though not everyone even has a rental history. Lack of rental history is not a factor that you can base a denial on, but a negative history is.

Keep in mind, evictions are essentially wiped after 3 years and criminal records older than 7 years are not permissible to consider. DC’s newest laws are meant to give folks a second chance. But recent history from a prior unit that shows late payments, noise complaints, or other lease violations should not be taken lightly. An applicant may have a good explanation here. Other property owners can be shady, too, and sometimes you really need to dig to get both sides of a story and then use your best judgment to make a decision. But, negative rental history, or a tenant who obfuscates their rental history, should always make you look twice.

Pro Tip: While keeping an eye out for red flags is wise, making judgements based on characteristics such as physical appearance is illegal. Just because the person who applied to rent your property doesn’t match what you were hoping for (and if you are picturing what your ideal tenant physically looks like, that’s a problem), it does not mean they’ll be a bad tenant. Your property is a business, and abiding by local laws is of the utmost importance.

Fraud

Falsified paystubs, fake IDs, erroneous credit reports, and forged bank statements are always getting harder to spot. “Professional tenants” understand how to work the system and may try and trick you with one of these methods. 

Tenants can pay for fake documents and list phone numbers of friendly contacts who will vouch for them. The screening process is a time for you to ask more questions, and not be overly trusting. Remember, it’s discriminatory to make a certain type of tenant jump through more hoops than another. As soon as you’ve verified that an applicant meets your criteria, you need to accept them.

At Nest DC, we use a screening software called FinDigs. It utilizes facial recognition technology to verify IDs, links to bank accounts to verify income and assets, and checks eviction and credit history in accordance with the regulations of our specific jurisdiction, Washington, DC. More than ever, it’s important to trust that the screening system you use is virtually fraud-proof and that you are not relying solely on your own judgment.

Regardless of which software you use, make sure that you memorialize your screening criteria and stick to it. While it can be hard to say no to making an exception, that’s where inexperienced landlords often get caught in a scam.

Know Who Is Living in Your Property

As the lessor, it’s your responsibility to sign a lease with the intended and actual occupants of the space. That means ensuring that every occupant is on the lease and that everyone on the lease was screened. 

A household may offer up its best candidate to apply and try to avoid having someone in the group with a bad rental history or bad credit apply. Even if one person alone meets your income and asset criteria, everyone in the household must undergo your screening process. We commonly get this request from married couples, which seems reasonable on the surface, until, perhaps, they split up, and you’re left with someone you haven’t screened on your lease, and they are unable to pay rent. Make sure the household as a whole meets your criteria, not just part of it.

Tenants who require co-signers may not understand that each tenant and each co-signer needs to sign the lease. Sometimes, they’ll assume that because they have a qualified co-signer, anyone can move into the property with them. Again, just because one person meets the full requirements does not mean you can skip screening the other occupants.

Remember: You do have to accept co-signers. Property owners sometimes have a blanket “no cosigners” rule in order to avoid renting to students or young people, but this is inadvisable. You can have stricter requirements for cosigners than tenants, and your lease should clearly state that cosigners are equally responsible for the lease terms.

Another red flag is when an applicant or new tenant asks about subleasing right off the bat. If it’s not their intention to live in the property, you should move on. Some tenants will try to sublease to make money off of your property. At Nest, we don’t allow subleasing at all. It puts a middleman between us and the occupant, leading to poor communication and less control over the situation. Instead, if a well-intentioned tenant does need to break their lease early, we offer other options that protect the owner’s interest. In a future article, we’ll dive into the best practices around early lease terminations.

Getting caught in a scam as a rental property owner is a legitimate worry that deters some people from becoming a housing provider in the first place. It’s all too easy to fall for falsified documentation and scheming tenants if you don’t know these common rental application scams. Once you’re aware of them and have the right tools in place, you can greatly lessen your chances of ending up in one of these situations. Trust your gut, stick to your process, and always follow DC law and fair housing regulations.

Have you ever fallen for a tenant application scam? No need to be ashamed! Share your story below and help educate fellow property owners.

Want some more resources? We have lots of good info on our Youtube channel about fair housing, DC’s rental assistance programs, and the benefits of working with voucher recipients.