Stop Your Rental Property From Being Stolen
It can be a huge relief to finally get your rental property ready to list and rent. It doesn’t matter if it has taken weeks or months to get to this point, you are ready to be done and get a new tenant into the property to pay the rent.
You craft the perfect rental listing ad, create an informational flier and get ready to get phone calls about the property.
Somewhere out there, someone sees your great listing online and steals it. They usually take the entire ad, lower the price and re-list it under their name. They start getting calls about the rental property instead of you.
This person usually uses a burner phone or better yet, only communicates via text or email. They tell the interested renter some story about how the previous tenant moved out and didn’t leave a key. The person who stole your listing tells the interested people to go drive by the house and see if they like it. If they do, this scammer tells them he will hire a locksmith to get them into the property once they sign the lease, wire the full security deposit and first month’s rent to them.
Some would be renters are smart and don’t fall for this. Other would be renters are desperate to find a place to live and don’t question it. They follow the directions of the scammer and unless you catch them in time, they move into YOUR property!
I personally know 4 landlords that this has happened to and I have heard of countless other landlords who fell victim to these scammers. These landlords are then left with someone who has moved into their property and they don’t have a lease with these people or the money the tenant paid to the scammer. The rental amount is usually about half of what the actual rent was and the people who moved in usually can’t afford the higher rent. Often, they have bad credit too.
The tenants who have been scammed don’t want to move because they signed a lease and paid the money to move in. If you are lucky, you can work something out with these tenants but that is usually not the case. Assuming you can’t work something out, the only recourse the landlord has it to take them to court and have them evicted. This takes time and there is no way to make these tenants pay you.
Tips To Prevent This From Happening To You
Over the years, I have had several of my listings stolen. It is very frustrating to say the least! But, luckily, I have never personally had to deal with someone who has actually moved into my listed property.
I got very pro-active and started making sure that the company name and all of my contact information is left all over the house.
- Create an information flier with company name, my name and all contact information.
- Tape my business card by every flier on the doors and windows.
- Also tape this information flier to every door and several windows on the inside of the house.
- Leave a stack of information fliers and business cards on the kitchen and bathroom counters.
- Leave business cards in a couple of the kitchen drawers and cabinets.
- State that the locks are not to be changed!
This so far, has stopped my listings from being stolen. I have received calls from a lot of interested people who said they talked, texted or emailed with so and so about this house (not me). They were told to go to the house and look around to see if they liked it. If they did, that person would get the lease to them. Usually, they were told the landlord was out of state so couldn’t be there to meet them personally.
Imagine their surprise when they show up and see the fliers all over the property. It also lists the correct rent amount so they call me, shocked that the price has usually doubled! Most of them are grateful that they didn’t get caught in this trap. Some try to negotiate the rental price down. Every so often someone is angry that they were mislead and they direct that anger at me!
However, because I had clearly stated who was renting the property and how to contact me, none of them signed the bogus lease and paid fees to someone who wasn’t me!
Also, my hope is that if a locksmith showed up to change the locks, they would call me before actually changing the locks. I make sure that the flier states that the locks are not to be changed.
These are some simple tips to help lower the chance that your rental listing will be stolen and rented to someone you did not approve.
There are no winners in a situation like these. Even the tenants have been scammed. They should have know that something that seemed to good to be true was too good to be true. But many of them are just too desperate to find a place to live and over look the weird vibes. Also, the scammers are usually very practiced and skilled at presenting a believable story.
I would be interested to hear if you all have any tips for helping to stop a listing from being stolen. Or, if you have become a victim to a situation like this, how did it turn out?
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Rental Income Guideline
A rental income guideline is imperative for every landlord to have. Have you ever talked to a prospect and just loved them! They seem to check all of the rental criteria guidelines but one – the MOST important one.
The one guideline they don’t meet is the rental income guideline which is having income of 3x the rent.
For me, this is a Pass – Fail question. There is no wiggle room. If this prospect does not meet my income requirement of 3x the rent, I will disqualify this person.
Are you still with me? Yes, I know that it is pretty easy to sit here right now and tell you that. It seems drop dead easy to say and many of you may agree with me.
But, I am the first to admit that it can be really difficult to turn down a great prospect who doesn’t have the right income. If you are lucky enough to run across a prospect who is great in every way but the income requirement, you may be very tempted to just go ahead and rent to this prospect.
I mean after all, they are awesome! How can you turn someone like this down?
My response is, very easily.(and yours should be the same by the way).
You may think you are doing this prospect a favor by renting to them but you are not! By renting to someone who doesn’t meet the income qualification, you are basically taking away their financial stability.
Cost To Live
Every prospect needs a certain amount of money to live on every single month. You will quickly find that many of them do not know how much their lives cost on a monthly basis. Your rental income guideline can help them not make a terrible mistake. They may be doing great right now and seem worth taking a risk on. But when you add the rent, you may be sinking their financial boat and yours as well, because you all are now linked together.
Imagine you meet them and their financial history is like a well balance boat. What happens when you add too many bricks to that boat? It will get lower and lower in the water and will eventually sink. That is what will happen with someone that you approve when they don’t have income of 3x the rent. Their boat may float along just great for a little while but will eventually end up under water. These tenants will have been set up to fail.
Where Is The Cut Off?
The problem is, if you make an exception, where is the cut off? I have this discussion all the time with landlords who say, well, this prospect is only $25 short, $50 short, $100 short, etc. Again you already have a rental income guideline and if the applicant doesn’t meet it, where do you draw the line and tell this person that they don’t qualify? Is it $25, $50, $100 etc.?
Keep in mind that I manage a lot of properties and in some I have “inherited” the tenants. I have had tenants tell me that they can’t drive to my office because they only have $25 or $35 or $50 and they can’t afford to put gas in their vehicle until they get paid.
What seems like a minor amount of money to you, may mean the difference in a prospect eating or not.
Co-Signer And The Rental Income Guideline?
You may say well, what about a co-signer? My response is going to be that a co-signer doesn’t help someone pay. A co-signer is not going to guarantee that the person you rented to has enough money that month to cover the rent and all of the other expenses.
The co-signer is the fall back person when when your tenant doesn’t pay and you have another person to collect from. This person is really just an emergency back up plan. The co-signer is most likely not planning on chipping in on the rent every month to make up the deficit. Leases don’t really work that way.
Unless you are going to put in your lease that:
- Rent is $1,000.
- Tenant will pay $950 each month.
- Co-signer will pay $50 each month.
How many co-signers do you think will agree to this? I would wager that not many will. A co-signer doesn’t benefit the tenant when this person doesn’t have enough money to pay the rent every month. A co-signer doesn’t help your applicant meet your rental income guideline.
A co-signer is not really an option for someone who doesn’t make enough money.
Life Happens – Even After This Tenant Moves In
You have rental income guidelines for a reason. Stop and consider what would happen if this prospect wrecks a car, buys a new(er) car, has some hospital bills, etc. All normal things that happen in every day life. This prospect’s income deficit will only increase. When that happens, do you think you will get paid in full and on time every month?
When that happens, it is the landlords fault. You – the landlord – have set this person up to fail. It may happen sooner or it may happen later but it will most likely happen.
This is not a rule that I will bend because it is not in the best interest of the prospect and it is also not in my best interests.
Remember that your decisions affect not just your life, but the lives of the people you either rent to or turn down.
Sometimes the kindest and best thing you can do is to tell this person that they are great, their credit is great, their job is great but they just don’t have the income and you can’t rent to them right now.
Memorize these words and use them often. “Company policy” requires income of 3x the rent.”
You can add any other words that you desire for empathy.
- “I am very sorry, but your income is not quite 3x the rent and company policy requires that. “
- “I am sorry but the income requirement is company policy I can’t make any exceptions.”
Remind them that it is in their best interests. I have had cases in the past where I was able to switch this person to another property. Then, down the road, when they earned more money, I was able to move them into a bigger property.
Your job is to put a tenant in the property who can pay the rent on time, every month in full. That isn’t going to reliably happen when someone doesn’t meet the very basic income requirement
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Calculate Debt To Income
When screening applicants, do you use calculate the Debt To Income ratio?
If you don’t, then you should!
I just had someone apply for a rental home. He currently owns a home and will be closing on it in a couple of weeks. He told me told he tried to buy a house but had been turned down due to an old bankruptcy. That didn’t make sense to me but I told him to fill out the request to see my vacant property and to answer the pre-screening questions that would be emailed to him. Once he did that, I told him I would get him in to see the home.
This happened Friday late in the day. I checked for his responses over the weekend but he didn’t request to see the property. I assumed he had moved on. Monday morning, I received a notice that I had received an application for my vacant property. When I looked at it, the application was from the person I spoke to on Friday.
Keep in mind, he did not follow directions and fill out the request to see the property and he didn’t answer the pre-screening questions. He also has not seen the property.
I reviewed his application and ran his credit. It is interesting to note that the credit screening report listed him as APPROVED. There were only two items in collections, one item past due and the rest of his debt was paid on time. His credit wasn’t terrible and his credit score was 601.
Calculate The Debt To Income Ratio
When I reviewed his application, I noticed right away that he had four bills listed that he owed. I ask every applicant to list what they owe monthly for bills.
- Car payment: $400
- Car Insurance: $133
- Cell Phones: $120
- Child Support: $425
- Monthly rent: $1,200
Total Monthly Debts, including the rent, are$2,278. This does not include gas, electric, water, fuel for his vehicle, food and entertainment.
His monthly gross income was listed as $3,900 and his net was $2,859.40
When you subtract the debts from the net income, you are left with $581.40 to pay all other bills for the month.
When I ran the numbers, his debt to income ratio was too high. This applicant could not afford this rental home and was denied.
I run across too many landlords who don’t follow all of the steps when screening applications. This guy seems very nice but he is desperate to move and isn’t using his own good judgement. If I let him move into this home, the chances are high that he would not be able to pay the rent.
If you want to find great tenants, follow a system and don’t make exceptions. Follow a process and follow every single step.
When you calculate the debt to income ratio, you get a better picture of what the applicant can afford.