As rental housing costs are soaring across the country, it is no secret that delinquent payments are affecting profitability for properties. Since 2021, rental rates have increased 13.4%, making the average rental cost $2495 a month, according to national real estate brokerage HouseCanary. Many renters are living paycheck to paycheck, even some of those who are making six-figures.
Alongside the increase in delinquent payments, there is also an increase in application fraud, specifically since COVID-19. A recent survey from Snappt reveals an estimated 11 million applications were falsified or altered in the last year alone. This could also be a contributing factor to the rise in late payments.
“We know people did not receive 15% to 30% increases in pay [to match rises in rental costs],” one regional manager stated. “So, to be able to still afford three times the monthly rent to qualify for an apartment is challenging.”
Evictions are one of the biggest hits for properties, pinning costs at an average of $7,500 per eviction with nearly 4 million evictions filed every year. Knowing application fraud is potentially contributing to delinquent payments and therefore, evictions, here are some solutions we have for mitigating both application fraud and delinquent payments:
Reducing Application Fraud
- Passive authentication – Should a resident be filling out their application online, passive authentication technology can help confirm an identity of a user without demanding any additional authentication. Observable data can help give evidence of an online identity preventing fraudulent applicationsfrom moving forward.
- Automated Verification of Income – Setting up an automated verification for income relieves both property managers and the prospective resident from issues or errors. It will also reduce the temptation or possibility for a prospective tenant to modify or create their own versions of the documents. Additionally, using software like Snappt can help detect if any documentation has been modified or altered.
Reducing Delinquent Payments
- Background checks – Rental history and credit checks can help properties better understand the qualifications of a prospective resident. Should they have no credit or rental history, properties can also ask for things like three months’ rent in advance or extra deposits to reduce risk in the event the resident doesn’t pay their rent.
- Rent Payment via Flex – Offer your residents a flexible way to pay their rent through Flex. Flex will pay the full rent on the day its due while the tenant can split the payments in two according to their own paydays.
- AutoPay options – Many residents simply forget to pay their rent. Give your residents the opportunity to set up auto-pay. Auto-pay is known for providing convenience, peace of mind, and significantly decreasing late payments.
- Automated Reminders – You can leverage software that enables text message or email notification to remind tenants to pay their rent. While email can be useful, text messages are more likely to be seen and read.
- Reasonable Penalties – While there is no set limit to penalty fees, most properties don’t charge more than 5% of the rental rate as a late fee and give a grace period of three to five days to pay rent. Reiterating your policies about late payments and fees are important as residents are not consistently reading or referring to their leasing agreement. It can be useful to share this message on a regular basis with residents as they may be more likely to pay on time because of it.
Properties that use these practices can help mitigate risk and reduce loss of revenue to the best of their ability. ResMan also offers a robust, statistically-backed, score-based screening solution that includes identity verification to help reduce your application fraud, helping you make better leasing decisions on the available applicant pool without adding risk. Learn more here.