How to prevent rental fraud: A property manager’s guide to protecting your business and owners

Disclaimer: This blog post is for informational purposes only and does not constitute legal advice. Readers should consult a qualified attorney for advice regarding their individual circumstances._ 

Rental fraud is a risk that can come at property managers from every angle, from fake applications and hijacked listings to payment scams that can hit your bottom line. Protecting your business and your owners’ investments requires a plan for each of these threats.

This post walks through how to build strong defenses at every stage of the rental process. We’ll cover practical steps for securing your listings, verifying applications, and protecting payments to both you and your owners. You’ll get a clear plan to protect your business without slowing down your leasing.

What Counts as Rental Fraud in Property Management?

Rental fraud is any act of deception that costs property managers, owners, or prospective tenants money. As a property manager, you face different types of rental scam risks that can damage your business financially and harm your reputation.

You’ll generally run into four main types of rental fraud:

• Listing/showing fraud: Scammers copy your property listings and post them elsewhere with lower rent prices. They collect deposits from unsuspecting victims who think they’re renting a legitimate property, and you’re left to deal with the aftermath.
• Application fraud: Prospects submit fake pay stubs, altered bank statements, or fraudulent employment letters to qualify for units they cannot afford. Some even use stolen or synthetic identities, combining real and fake information to create a seemingly plausible applicant identity.
• Vendor/owner fraud: Bad actors can intercept communications to redirect owner distributions or vendor payments to their own accounts. They might pose as a vendor asking to update their bank login details or an owner changing their direct deposit information.

If you’re running a smaller operation, you might be more vulnerable since you’re likely handling many roles yourself without a dedicated fraud detection team. With these challenges in mind, let’s look at how you can protect your listings from the very first point of contact.

How to Secure Listings, Inquiries, and Showings

Your first line of defense against rental scams starts with how you present your properties to the public. Securing the top of your leasing funnel with clear, consistent branding and controlled access can deter many common fraud schemes before they even begin.

Watermark Photos and Standardize Listing Details Across Sites

Every property photo you post online, whether on listing sites or your property management website, can include your company logo and contact information as a visible watermark. You can place the watermark where it’s difficult to crop out, such as across the center or along the bottom of the image. It’s also helpful to use the same property descriptions, rent amounts, and official business contact details across all listing sites.

Scammers often change small details when they create a fake listing, so maintaining consistency helps legitimate prospects recognize these common rental listing scams affecting property managers.

Route All Inquiries to Your Official Website and Phone Number

You can set up a single point of contact for all rental inquiries rather than using personal email addresses or cell phones. A dedicated business phone line and professional email address on every property listing helps centralize communications. When you direct all prospects to your company website to submit inquiries, you can track activity and identify suspicious patterns.

Centralizing your communications helps you spot red flags, such as multiple inquiries using similar language from different names or prospects who refuse to use your official channels.

Add Property Signage with Your Company Name and Contact

Place professional “For Rent” signs at every vacant property that display your company name, logo, and phone number. You can include text such as “Only rent through [Your Company Name]” or “Beware of rental scams” to warn prospects. Physical signage gives a tangible point of verification, confirming for prospects that they’re dealing with the legitimate property manager.

Use Pre-Qualification and Calendar-Based Showings to Cut Risk

Collecting basic tenant application information such as the applicant’s full name, phone number, and current address adds a simple but effective layer of screening. Using automated showing coordination tools also helps by generating unique access codes for each scheduled visit.

For example, Buildium’s integration with Tenant Turner supports self-guided tours where prospects receive a time-limited access code once they share identification.

Control Access with Unique, Time-Limited Codes and ID Checks

You might consider replacing traditional lockboxes with electronic versions that generate a new code for each showing. This helps prevent lockbox scams where a scammer gets a code and then illegally sublets the unit. Require prospects to upload a photo ID before they receive their access code to add another layer of identity verification.

Smart locks can track entry times and change codes on their own between showings, giving you a clear record of who accessed the property and when. Once you’ve established a secure showing process, you’ll want to apply equally strong defenses to the application and screening stage.

How to Stop Application and Screening Fraud

Now that you’re attracting legitimate prospects, the next step is verifying they are who they say they are and can meet their financial obligations. A consistent, documented screening process is your best tool for spotting fraudulent documents and protecting your owners from risky tenancies.

Verify Identity Consistently with Document and Data Checks

Match every piece of information on a rental application against the government-issued ID the applicant provides. Look for consistency in spelling, dates of birth, and addresses. Be on the lookout for red flags on the ID itself, such as mismatched fonts, blurry photos, or edges that look altered.

Validate Income with Trustworthy Sources and Clear Thresholds

It’s common practice to set a firm income-to-rent ratio, typically 3:1, and to verify an applicant’s income through multiple sources. You can call employers directly using phone numbers you find on your own through company websites, not the numbers given by the applicant. You can also request pay stubs directly from an employer’s HR department.

Bank statements alone may not be enough to prove employment, as funds can be temporarily deposited to create a false picture of financial stability.

Confirm Rental History with Prior Landlord References

Contacting previous property managers can give you a clearer picture of an applicant’s rental history. Use contact information you verify independently through public property records or online searches. Scammers sometimes list friends as fake references, so confirming you’re speaking to the actual owner or property manager is an important step in preventing rental application fraud.

Apply Screening Criteria Consistently for Fair Housing

Document your screening criteria in writing and apply those standards equally to every single applicant. A standard checklist might include a minimum credit score, income requirements, and rental history standards. Applying your criteria consistently is a key part of complying with Fair Housing laws and avoiding discrimination claims.

Important note: If you’re ever in doubt as to whether or not you are in compliance, speak with a legal professional that has expertise in federal, state, and local rental law.

Once you’ve created your criteria and consulted a legal expert, you can turn to software to help with the actual screening. Look for tools that support screening from one of the major credit reporting agencies. For example, Buildium’s tenant screening is powered by TransUnion and provides comprehensive credit, criminal, and eviction data for each applicant. Managers can apply consistent criteria across applicants. However, since laws vary by state and locality, it’s still important to consult with a qualified legal professional.

Log Decisions and Documents in One System for Audit Trails

Keep every application, screening report, email, and decision note in a centralized system that creates a clear audit trail. Documenting why you approved or denied each applicant based on your tenant screening criteria helps protect you if your decision is ever challenged.

A complete and organized record of your screening process demonstrates fairness and diligence when you maintain consistent tenant screening standards. With a thoroughly vetted applicant approved, the next step is to secure the lease execution and move-in process to prevent any last-minute issues.

How to Lock Down Lease Signing and Move-In

After you’ve approved a qualified applicant, the final steps before they become a tenant are just as important for rental fraud prevention. Securing the lease signing, fund collection, and key handoff with clear, documented procedures helps protect all parties and sets the right expectations from day one.

Use E-Signature with Signer Order and Status Tracking

You can configure your e-signature process to require signatures in a specific sequence. For example, the primary tenant signs first, followed by any co-signers, and finally you as the property manager. You can also set up your digital lease documents so that certain fields must be initialed or filled out before the final signature block becomes available.

Use tools with built-in e-signature functionality that creates a complete audit trail showing when each party viewed and signed the documents.

Require Renters or Property Insurance and Track Compliance

Making renters or property insurance a mandatory condition of the lease is a common practice, and could be required by law, depending on your location. You can require proof of coverage before handing over the keys and set up a system to verify that the policy remains active throughout the lease term. It’s also helpful to add language to your lease stating that failure to maintain insurance is a lease violation. This is another sensitive step where it’s a good idea to enlist the help of a local rental law expert.

Accept Move-In Funds Through Controlled, Recorded Channels

Another common practice is to avoid accepting cash for security deposits and first month’s rent. You can require certified funds, such as a cashier’s check, or use online payment systems that create a clear, unchangeable transaction record. Processing all payments through your property management accounting system ties each transaction to the correct tenant and property.

You can also consider forgoing security deposits entirely and instead offer alternatives through services such as Obligo. These alternatives offer the same protection for your business and clients and give tenants greater flexibility.

Complete a Documented Move-In Inspection Before Key Handoff

As a final step, schedule a thorough move-in inspection with the tenant present. Take date-stamped photos of every room, paying close attention to any existing wear or damage. Using a detailed rental walkthrough checklist that both you and the tenant sign establishes a clear baseline for the property’s condition.

Uploading all photos and signed inspection forms to the tenant’s file creates a permanent record you can reference at move-out. After move-in is complete, your rental fraud prevention focus shifts to protecting ongoing rent payments.

How to Protect Owner Money and Vendor Payouts

Protecting owner distributions and vendor payments is just as important as tenant-focused fraud prevention for maintaining financial security and trust. A few simple verification steps can prevent costly mistakes.

Verify Owner Bank Details and Require Dual Approval for Draws

Whenever a property owner requests to change their bank account information, call them directly at a previously verified phone number to confirm the change. Never rely solely on email requests, as email accounts can be compromised.

You can also implement a dual-approval system where two staff members must sign off on any owner distribution above a set threshold.

Onboard Vendors with W-9, TIN Match, and Insurance on File

Before paying a new vendor, collect a completed W-9 form and verify their Tax Identification Number (TIN) through the IRS. It’s also a good practice to require certificates of insurance showing general liability coverage and to check for any required business licenses.

Create a database of vetted vendors with verified contact information in your rental property software that can help you confirm that any future payment requests are legitimate.

Require Approvals for Bills Over Set Thresholds

You can establish dollar thresholds that trigger an additional review before a bill is paid. For example, you might require a manager’s approval for bills over $500 and an owner’s approval through the property owner portal for anything over $2,000. These limits can be adjusted based on the typical maintenance costs for your properties.

Bill approval workflows allow you to configure these thresholds automatically, routing bills to the correct approver and maintaining an audit trail.

Reconcile Bank Accounts Monthly and Monitor Exceptions

Compare your bank statements to your property management accounting records every month. Look for payments to unfamiliar vendors, duplicate payments, or amounts that don’t match approved bills. Investigating any transaction you don’t immediately recognize can help you catch fraud early.

A Step-by-Step Rollout Plan and KPIs for Rental Fraud Prevention

Putting these defenses in place isn’t a one-time task. It’s about building a system, training your team, and measuring its effectiveness over time. A structured rollout plan helps you make steady progress without disrupting your business.

#1: Set Baseline Metrics and Set Quarterly Targets

Start by measuring your current fraud exposure. You can count how many fraudulent applications you caught last quarter, how many chargebacks you faced, and any instances of payment fraud. From there, you can set specific improvement targets for each quarter, such as reducing chargebacks or catching more fraudulent applications.

#2: Publish SOPs and Train Staff on One Consistent Process

Write down standard operating procedures (SOPs) for every fraud prevention step, following property management accounting best practices for documentation and compliance. Document how to verify an applicant’s identity, what questions to ask references, and which red flags require a manager’s review. Train every team member on the same procedures, so everyone understands their role in protecting the business.

#3: Audit Monthly and Review Disputes and Incidents

Each month, you can randomly select a few tenant files and verify that all fraud prevention steps were followed. Check that identity verification documents are present and that reference checks were completed. Reviewing every fraud attempt, successful or not, helps you understand how criminals are targeting you and where you can strengthen your defenses.

#4: Use Dashboards and Reports to Track Improvements

Create a simple dashboard to track your key fraud metrics each month. Visual tracking helps you spot trends and demonstrate progress to your property owners. For example, Buildium’s analytics dashboard provides visibility into delinquencies and other business KPIs. Paired with screening and payments data, these metrics can help flag potential risk trends.

Build Stronger Defenses Without Slowing Your Operations

Implementing rental fraud prevention measures doesn’t have to mean longer vacancy times or a frustrating experience for good applicants. With the right processes and tools, you can actually speed up leasing for legitimate tenants while effectively blocking fraudulent ones. A smart fraud prevention strategy is all about building consistency and documentation into your daily workflows.

Here are a few final thoughts to keep in mind:

• Start with your highest-risk areas first, which are often payment processing and tenant screening.
• Use property management software and automated workflows to enforce consistency and make sure no steps are skipped.
• Document every decision and transaction digitally to create a clear audit trail.
• Train your entire team so everyone understands their role in protecting your business.

To see how you can implement these rental fraud prevention workflows in your business, schedule a guided demo or sign up for a 14-day free trial of Buildium.

Frequently Asked Questions About Rental Fraud Prevention

What Is Considered Rental Fraud for a Property Manager?

For a property manager, rental fraud is any deceptive act that leads to financial loss or liability. Common examples include listing scams where criminals steal your property ads, application fraud with fake documents, payment fraud, and schemes to redirect owner or vendor payments.

How Can I Verify Income Without Asking for Bank Logins?

You can verify an applicant’s income by calling their employer directly, requesting pay stubs from the HR department, or using an employment verification service. For self-employed applicants, request reliable proof of income (e.g., recent tax returns and/or bank statements) and verify through trusted sources; exact document periods vary by policy.

What Should I Do if My Listing Is Hijacked?

If you discover a fake listing using your property’s details, report it to the website’s fraud department immediately. You can also post warnings on your company website and social media, contact local law enforcement, and update your legitimate listings to include a scam warning and your official contact information.