How to Spot a Property Management Scam

CI - Jason Hartman Rental Property InvestingSpiderman isn’t the only person with a sixth sense. Most of us have the ability, to a lesser or greater degree, to realize that something is just a little bit “off” about a particular set of circumstances. We should listen to our gut more often. It might be trying to warn us clear of a property management scam. As heinous as that thought is, Jason Hartman reminds you that, as a landlord, you should keep in mind that there is a difference between the incompetence displayed by a legitimate manager who is simply bad at his job and the illegality perpetrated by a scam artist.

While there are many different types of scams circulating in the property management industry, one of the most effective is also one of the simplest. Here’s how it works. Your newly hired “property manager” saturates the local media in order to draw the most interest in renting your unit. Anyone who has ever just missed landing a great apartment knows the frustration of multiple people vying for the same property. What if, rather than renting to a single tenant, the property manager carefully spaced out the showing and move-in schedule so that he could sell the space to five different tenants, collecting five different sets of first and last months’ rent in the process?

Obviously, this is completely unethical and illegal but this “property manager” might easily put $8,000 to $10,000 in his pocket over the course of a few hours and skip town before either the landlord or his new tribe of unrelated tenants knows what hit them. It’s kind of icky to think about, but the only way to beat this kind of scam is to think like a scammer and don’t give him the opportunity to take advantage of you.

As a landlord, the easiest way to avoid being scammed by a fake property manager is to take the time to conduct a background check. It’s actually not hard to establish a management company’s bona fides, and if the individual you want to check out seems evasive, be very concerned! Research state and county records to make sure the company is legitimate. Ask to see identification and then search local government websites and the Better Business Bureau to insure there’s nothing fishy associated with that name.

The bottom line is that any honest property manager who has been in business for even a short length of time will have some sort of track record that can be easily located. If nothing else, ask for references. While it’s a fact of life that every business has to start somewhere, it’s not your responsibility to risk your own money and reputation giving a brand new guy or gal a try. Let someone else be the guinea pig. You should only entrust your rental properties to a proven property manager. (Top image: Flickr | Rooftop Mind)

The Commercial Investing Center Team