Multifamily operators are battling fraud and labor shortages on the front lines, say InterFace panelists

The InterFace Carolinas Multifamily 2022 rental and operating panel included, from left, Teresa Devos of RKW Residential (moderator), Kevin Owens of RPM Living, Amanda Kitts of Northwood Ravin and Bob Moore of FCA Management.

CHARLOTTE, NC — Property managers are navigating a minefield of problems in today’s apartment market. Analyzing tenant fraud claims, collecting overdue rent, and handing over self-service tenant units are part of the day-to-day work of savvy apartment operators.

Amanda Kitts, senior vice president of property management at Northwood Ravin, a North Carolina-based multifamily owner and operator, said part of the role of an operations professional today involves poring over documents. such as pay stubs, identification, and employment records to ensure the potential resident is solvent. She said fraud is more prevalent in some markets than others, so it’s imperative property managers are properly trained.

“Charlotte is still a very big market for fraud, but Durham not so much. Chapel Hill is spotlessly clean; nobody’s doing anything wrong in Chapel Hill,” Kitts joked. “We have these apps and these pay stubs, and maybe one of them might be off, and you need to investigate and Google. We’re almost mini FBI investigators.

Kitts’ comments came during France Media’s InterFace Carolinas Multifamily leasing and operating panel, which took place April 14 at the Hilton Uptown Charlotte. The networking and informational conference drew more than 260 attendees from all facets of the multifamily industry in North and South Carolina.

Kevin Owens, division president of RPM Living, an Austin-based multi-family owner and operator, noted that in some pockets of the Carolinas, 60-70% of claims his company receives are fraudulent, so it’s a situation that’s at risk. the mind.

“It’s really important to help our on-site team members understand what’s going on and identify the most obvious challenges early on, whether it’s fraudulent pay stubs or an address for a business where they worked that might not be a building or a place where they actually operate,” Owens said. “Being able to identify red, yellow, or orange flags and dig a little deeper is something that has been very successful for us.”

Panelists warned that not all scam apps are fake. Thus, it is vital for property managers to implement adequate software to detect inconsistencies that would go unnoticed by the naked eye. Bob Moore, managing director of the Charlotte-based operator FCA Management, said some of the pay stubs his company has reviewed in the past are completely legitimate, but were purchased from Facebook Marketplace or other forums.

“The job of a leasing consultant is not to look at a document and try to see if it is fake or not. It’s just not in their job description,” Moore said. “This [new] technology has uncovered many cheats that may have existed before that we hadn’t seen. »

Without naming specific brands or products, each of the panelists pointed out that they use multiple software platforms for background checks. They said it was a worthwhile expense because the alternative was to have tenants who cannot afford to live in the units and have no intention of paying or leaving.

Owens said part of the problem stems from the national eviction moratorium in response to the COVID-19 pandemic. While the nationwide eviction ban expired last year and most jurisdictions do not have an eviction ban in place today, there remains an arduous process to evict tenants through legal channels. .

“We have residents living with us today in many of our assets who lived with us in March 2020 and haven’t paid $1 in rent since that date,” Owens said. “The reality is that the courts of these communities have not let anything happen. The good news is that we have developed strategies to try to address this problem from a non-judicial perspective.

Kitts said Northwood Ravin is experimenting with an in-house collections division to bypass the bureaucracy associated with traditional collection agencies. Additionally, his company and other property management companies do “cash for keys”, whereby the property manager pays the tenant to move out and, in some cases, also offers to pay for moving and storage.

“It’s worth it in the long run just to get bad debt off the books,” Owens said.

Panelists said that even if landlords take legal action, court systems are blocked for several months, or even a full year in some jurisdictions. For example, Kitts said his company still doesn’t have court dates for eviction cases filed more than a year ago in Metro Atlanta’s DeKalb County.

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In the face of so much fraud and some unsavory activity by frontline tenants, Owens said it’s understandable that property managers can become frustrated. He said it can be daunting to sign 10 leases in a week only to find that half or more have been turned down, impacting letting agents who work on commission and are usually only rewarded afterwards. the resident’s move.

“Vice principals are crushed because they don’t get their clawback bonuses because people aren’t paying rent,” Owens said. “What can we do as an industry, as companies and as leaders to help them stay engaged and motivated? This ultimately impacts our customers – developers and owners. If you don’t have great people working for you who are motivated and committed, that’s going to be a problem.

“We’ve had to implement help from our front office to make sure people on site don’t feel completely deflated about having to call people up and beg for their keys because they’re still not paying rent. “, said Kitts. “People matter. Our employees will always come first. We have to do a really good job loving them for the rest of their time that they are with us for all that they have been through.

In addition to maintaining morale, the operator must make the workplace pleasant as there is a shortage of skilled labor. Owens said one strategy RPM Living is implementing is to centralize its talent base, on both the rental and maintenance side of the business. He said the company has a centrally located team that handles maintenance orders in three communities simultaneously.

“It’s something we seek to do because our customers are looking for ways to cut costs and close deals better,” Owens said. “It’s our job to help them understand that. It’s not an easy job to do.

Kitts said his company has been successful in recruiting and training members on the rental side, but maintenance workers are harder to come by due to a shortage of talented and experienced technicians.

“We’ve always struggled with maintenance, so we’re seeing the payroll is completely out of whack,” Kitts said, pointing out that maintenance workers get better wages and therefore more job security. job. Panelists agreed they were seeing 20-year highs for wages across the board.

“In a way, I’m glad they know their worth,” Kitts continued. “Maybe in the past we should have paid a little more for some of these jobs because of the difficulty of the jobs. We need to hire people with very basic skills and train them accordingly.

Northwood Ravin recently created a training director position. This person’s only job is to train incoming and existing technicians and earn them as many certifications as possible, Kitts said. She said basic training is an essential piece of the puzzle because “the labor pool is empty” for maintenance roles.

Panelists agreed that the apartment industry has largely been able to absorb higher salaries for maintenance and leasing professionals because rent growth has been so robust, especially in the Carolinas. In 2021, asking rental rates rose about 20% in Charlotte and Raleigh-Durham year-over-year, according to the latest data from Northmarq.

Panel moderator Teresa Devos, executive vice president of RKW Residential, asked how long rental rates would continue to rise. Eventually, rent growth will slow, panelists agreed, but they don’t see that happening anytime soon due to the limited supply of living options and continued high demand.

“All indicators are very healthy right now,” Moore said. “There is still not enough supply.”

— John Nelson