The Hidden Cost of Fraud: How Bad Applications Impact Operations Long After Move-In

Identifying fraud during the tenant screening process and rejecting the applicant can feel like a big win. You prevent bad tenants from wreaking havoc within your community and protect your business.

But applicant fraud isn’t just a front-end leasing problem—the impact of fraud can spread like wildfire, eventually touching every part of operations. 

Approving a resident is just the beginning of the financial and operational impact of fraud. Most fraudsters are gaming their rental application to get through the door, and once they’re in, they don’t care about staying current.

Bad tenants will take what they can get before cutting and running, leaving you to pick up the pieces.

Today’s tenant scams have evolved from paystub forgery to professional, coordinated attacks, and the cost of application fraud has risen accordingly. Scammers are no longer submitting fake paystubs to cheat your rent-to-income ratio.

This new breed of fraudster wants access but doesn’t care about the risk of eviction. They won’t pay rent, set up illegal activities on-site, and rack up lease violations along the way. Their behavior will affect all areas of the business, from operations and finance to legal and marketing.

We’re breaking down the operational impact of fraud, why it’s more than just a leasing miss, and how its downstream impact can hit every team over time. 

Quick Insights

• The cost of application fraud doesn’t stop with leasing. Approving a fraudulent tenant has a cascading effect on operations, legal teams, finance, and marketing. 
• Fraud can compound throughout a portfolio as organized scammers repeat their tactics across properties—and siloed reporting can mask hard-to-catch fraud patterns. 
• Portfolio-wide visibility and reporting are crucial to detecting behavioral signs of fraud. 
• Upfront fraud prevention costs, like income and identity verification, may seem expensive, but investing in fraud detection can save thousands in lost rent and legal fees.

The Immediate Financial Impact and Cost of Application Fraud

A bad tenant has slipped past your fraud checks and moved in. Now what? Costs can add up quickly from unpaid rent and eviction risk. When the resident finally leaves, the overall sticker price can continue to climb during the turnover process.

Bad Debt and Missed Rent 

Fraudulent applicants often show early-stage nonpayment, slowly making rent collection a nightmare. They might also exhibit some concerning behaviors within the first couple of months, like:

First month rent issues. Tenants may claim they’re a little behind this month and beg for more time. Or they may pay fraudulently, through a counterfeit check or stolen credit card.

Partial payments. A resident could offer to pay part of the rent but say they can’t afford the full payment right now. This story might quickly become a repeated line.

Short-lived payment consistency. You might receive rent payments on time and in full for the first month or two, but soon after, rent starts coming late, in partial amounts, or not at all.

The cost of application fraud may not show up immediately in your reporting, because bad debt can accumulate quietly. Stolen checks may not bounce right away, and disputes about payments from stolen credit cards could take weeks or months to resolve. 

While traditional credit checks and income verification are a good first step, they can’t always predict this kind of behavior. This makes combating applicant fraud even more challenging.

Turnover and Unit Loss

The cost of application fraud goes far beyond missed rent. Tenants from fraudulent applications are more likely to lead to expensive evictions, early move-outs, and unit abandonment.

The eviction risk from fraudulent applications is much higher: LeaseLock’s 2024 Industry Risk & Revenue Report found that almost 24% of evictions can be directly linked to fraudulent applications.

On top of potential evictions, apartment turnovers are time-consuming and involve multiple teams, like leasing, maintenance, and marketing. So operators focus on driving resident retention, carefully forecasting lease end dates, and tracking vacancy rates. An unexpected departure throws a wrench in these plans. ​

Having unplanned downtime can also cut into your bottom line—every month a unit is vacant is a month you’re not collecting rent. Plus, managing turnovers off-cycle can accrue additional, unplanned costs. Here are just a few examples of the cost of application fraud:

Vacancy downtime. Not only are vacant units not accruing rent, but unplanned vacancies are especially disruptive to financial forecasting and net operating income.

Lost rent. You may never recover unpaid rent from evictions or abandonment. Even if you send the debt to collections or an eviction judgment is in your favor, you might never recoup the cost.

Marketing and leasing costs. Successful leasing takes serious marketing effort, including advertising and touring costs. And unfortunately, you might not be able to market or show the unit while an eviction works its way through the legal system.

Repairs and maintenance. Fraudulent tenants are more likely to leave units in bad shape. They have no intention of recouping their security deposit, and they don’t care about getting a good renter reference down the line.

Dealing with unplanned turnovers can throw off momentum in high-demand properties as occupancy rates sag and unit availability becomes unpredictable.
Increased unit supply can drag down rent, and if fraudulent residents take advantage of concessions before hightailing it out of there, net effective rent calculations can go haywire. 

Operational Strain on Teams 

Bottlenecks, strains on your on-site and centralized team, burnout—they’re all byproducts of the operational impact of fraud.

On-Site Team Burnout

Fraudulent occupants create issues that harm on-site team members and neighbors alike. The result? On-site staff members have to deal with a higher volume of:

• Payment disputes
• Lease violations, like unauthorized pets or subletters  
• Noise complaints
• Damage to shared amenities and community areas

Each one of these issues creates operational overhead, whether it’s the time spent chasing down payments, documenting issues, logging complaints, or contacting law enforcement.

And if the problem escalates, on-site staff may need to coordinate with legal or regional teams to prepare formal communications, like a notice to cure or quit.

The emotional toll of repeated high-conflict situations can take a toll on staff members. If they don’t get a break from resident disputes, they’re more likely to burn out, leading to disengagement, lost productivity, and even employee turnover. 

Centralized Team Bottlenecks

Too many on-site issues bubbling up to centralized teams can create workflow bottlenecks, further compounding the operational cost of fraud. Processes can quickly get bogged down, thanks to:

• Escalations from on-site teams. When a resident relationship goes off the rails, on-site operators may raise the issue with centralized offices. 
• Exception handling. Flagged applications need manual evaluation. Too many fraudulent applications can flood the review backlog and overwhelm teams. 
• Manual investigations. Looking into alleged illegal activity or repeated lease violations can take time and effort, including conducting on-site visits or coordinating with law enforcement.

Every escalation, exception, and investigation involves significant rework. Fake applications that slipped through the cracks may need re-review, or team members might need to pull historical data to support legal or compliance matters.

Legal and Reputational Risk

The cost of application fraud spreads across every area of the business, including legal and marketing.

Eviction Risk and Legal Exposure

The average eviction can cost $7,500, encompassing a range of direct and indirect costs. Upfront costs include court filing fees, attorney fees, and staff time spent preparing documentation. As cases drag on, each of those costs can grow and continue to drain resources. Many eviction cases proceed slowly, typically lasting anywhere between 7 and 16 weeks. Contested evictions can take longer, especially in tenant-friendly jurisdictions like New York City.

On top of eviction risk and associated costs, cases involving fraud are often more complex and time-consuming. In these cases, the reason for eviction relies on more complicated legal justification, like accusations of identity fraud.

Including fraud accusations can raise the burden of proof to show that the tenant had fraudulent intent, requiring:​

• More evidence and documentation to establish the tenant meant to commit fraud, rather than an innocent mistake 
• Separate lawsuits and legal hearings to address fraud claims, including investigations by other government agencies 
• Anticipating the risk of tenant counterclaims, including accusations of discrimination and deceptive practices

These complexities raise the stakes of eviction cases, which aren’t always successful. Operator errors, skepticism from judges, and strong tenant defenses can all tip the scales against operators.

For example, minor mistakes during tenant screening can create major compliance headaches and jeopardize an eviction.

Another potential problem? Evictions draw scrutiny. Documents submitted during legal cases enter the public record, exposing confidential information about internal operations. In highly regulated jurisdictions, regulators can use eviction case documents to launch investigations or allege non-compliance.  

Brand Impact

Bad tenants have a negative impact on operators and their neighbors. Problematic residents are more likely to disregard community rules and lease terms around:

• Noise
• Guests
• Assigned parking spaces
• Odors
• Pets
• Respecting shared amenities, like pools or fitness centers

Annoyed and frustrated neighbors are more likely to contact the office with complaints, creating even more operational bottlenecks. Dissatisfied residents may also share negative reviews online and by word of mouth.

These negative reviews can erode your brand and community image, ultimately making it harder to attract good tenants and market units successfully. A positive reputation is an important factor for many apartment seekers and can make or break your leasing pipeline. 

How Fraud Compounds Across a Portfolio

These days, fraud is rarely a one-off event. The new face of fraud is coordinated, repeatable, and scalable.

Fraudsters have leveled up their tactics, reusing fraudulent applications across properties. If one property accepts a fraudulent application, scammers assume they’ve found a way to game the system—they’ll apply the same tactics to every property in a portfolio.

Without portfolio-wide visibility, operators might miss multiple applications with shared names or other details—a sign of a possible fraud ring at work. Noticing other signs, like repeated application attempts with minor variations, can be difficult without cross-property insights.

Unfortunately, reviewing each property individually can’t detect systemic risk, because fraudsters have become adept at fine-tuning applications to match screening criteria precisely.

Over time, a series of similar (but fraudulent) applications can create a false sense of what “normal” is for that property. This only amplifies the cost of application fraud.

Fraud detection and portfolio-wide risk assessment is crucial. Centralized teams need visibility into behaviors across properties to detect when fraudsters are strategically working the application process within a portfolio.

Prevention vs. Recovery

So where should you invest your resources—fraud prevention or fraud recovery? Both can be time-consuming and expensive, depending on your approach. But a quick comparison of costs vs. benefits shows why an ounce of prevention is worth a pound of cure.

The costs of detection and prevention often stem from operational changes and additional overhead during leasing: ​

Approval timelines. Completing fraud checks can increase tenant screening timelines.

Technology investment. Software subscription costs for identity verification and fraud detection tools can be high, especially for large portfolios and teams. 

Onboarding and training. Teams need onboarding and repeated training to use new tools, including best practices for security and compliance.

Exception handling. Flagged applications may require additional review, investigation, or discussion from centralized teams.

New processes, software subscriptions, and operational expenses may seem like too much hassle. But snubbing prevention can compound the cost of application fraud over time. According to a 2025 National Apartment Association article on fraud, the costs resulting from just one bad lease can reach $100,000.

The cost breakdown demonstrates why one bad lease can reach six figures:

Evictions. Globe Street estimated in 2024 that eviction costs can average $20,000 to $25,000 per apartment.

Missed rent payments. Depending on your property’s rental rates, this number can rise into the thousands quickly. For example, in Maricopa County, Arizona, the average eviction in 2023 involved $3,450 in unpaid rent.

Unplanned unit turnover and vacancy. In a brief from 2023, Multifamily Dive shared that turnover costs are nearly $4,000 per resident, including costs to advertise, complete repairs, offer concessions, and recover lost rent.

Fraud-related recovery is unpredictable and reactive, leaving teams scrambling to make up for unplanned turnover and legal efforts.

Because the work is inconsistent, it’s more disruptive—and stressful—to teams who work less efficiently and can burn out from repeated firefighting.

These costs end up putting your net operating income and operational efficiency on the line, so risk mitigation is paramount.

Fraud prevention may require an initial investment, but catching application fraud before it harms your business can recoup that investment several times over.

The Case for Upfront Investment

When operational costs already feel sky-high, spending on fraud prevention can feel like another line item eating away at your bottom line. But fraud prevention is an investment—not an expense.

The true cost of application fraud can drag on for months, racking up legal fees, bad debt, and reputational damage along the way.

Multifamily bad debt can accrue quietly, while the delayed costs of leasing disruptions, review backlogs, and manual investigations will slowly but surely add up.

Fraud poses high risks to assets across markets and regions, and protecting both operations and investments is paramount. Today’s successful asset managers see fraud prevention as a necessary part of responsible and proactive asset management.

Ready to make fraud detection and prevention a proactive part of your process? ​See how Snappt helps teams identify fraud earlier and reduce downstream operational risk through ou rApplicant Trust Platform.