Crime Rate - How high is too high?

Rental Property Investor · Denver, CO · Member since 2018 · 14 posts · 6 votes

I recently stumbled on a fully occupied 6 unit property that would bring in about 35% Cash on Cash and that does take into consideration 15% vacancy. The city itself has a higher than average crime rate according to neighborhood scout. To be exact it says "Safer than 15% of U.S. Cities". Most crimes constitute Theft, Burglary, and Assault. Only 1 murder reported in 2017. So I wish to ask everyone... At what point do you draw the line and say that a neighborhood is too shady and move on? What other factors do you consider outside of neighborhood scout?

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Jim K.

Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes

@Jason Baldwin

I have exactly the same issues to report in my city. There are quite a few pocket opportunities for local investors in the "high-crime" areas that out-of-state investors never touch because they can't really come to a realistic understanding of the neighborhoods, street by street. I've had even locals who live on the other side of town and don't really know my target area tell me that I'm working and planning to live in a high-crime area, never having seen my properties, never having walked to the municipal building and the police station immediately across the street from my multifamily property in the area, never having met the many retired neighbors, never having talked to the kids who play up and down the side streets. No, no, no, the local stereotype of the general area holds, the comments on the Internet from 10-15 years back stick around, and the local retirees and their families keep their mouths clammed shut. They know they live in a misunderstood neighborhood and the minute perception more closely aligns with reality, county assessments and their property taxes will go way, way up.

If you're going to invest in low-C and D-class neighborhoods, you've got to walk the streets at different times of the day and keep notes. If you can't do that, you have to pay someone who's done it. As in all things in REI, freebies are few and far between and only the gubmint hands out the ones worth having.

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Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
8y
@Jason Baldwin
Despite the many linguistic precedents of the English language, the website is called Bigger Pockets and not Deeper Pockets. Just think about that for a moment and see if you can avoid laughing yourself to tears.
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Pete Barrow
Investor · Indianapolis, IN · Member since 2017 · 145 posts · 158 votes
8y
As far as OOS investing goes, I know exactly one OOS guy who invests here (he's from Denver too, btw) and has been pretty successful. That's because he spends a lot of time here. He's been able to buy cheap and smart, mostly, because he knows the city and the people better than a lot of locals.
As to crime rates across neighborhoods: call some better PM companies and ask if there are neighborhoods where they refuse to manage. Likely, they will all tell you the same thing.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
8y
The way I look at areas is it widespread or just a property that is mismanaged with the wrong tenants in there? If it is a bad area even if you rehab it you will attract the same crappy tenants that want to live there. The good tenants as soon as they can will try to move out of the area and improve their situation.
Call the local police department and they often have the real time stats. You could have an area with petty theft and domestics and a large percentage but area overall might not be that bad. Conversely you can have an area with not as many reports but the ones that do occur are drugs, murder,rape, car theft, home intrusions,etc. The areas with more severe crimes tend to be scarier to live in.
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Adam Mittermeier
Specialist · Little Rock, AR · Member since 2018 · 148 posts · 71 votes
8y
Just a side note, a lot of these crime rate statistics are taken by how a crime was dispatched to the police department in that area and some of them take statistics based on what the report was classified as. This does not necessarily mean that a crime actually occurred.
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Andrew Boykins
Business Manager · Annandale, VA · Member since 2012 · 23 posts · 7 votes
8y
I think it's all relative. I invest in Baltimore City and in spots some people would be uncomfortable. I also use crime data from Trulia to find the lowest crime portions of Baltimore. Those rankings are all relative and I bet a lot of folks would still be uncomfortable in the places deemed 'low' because it's just low for Baltimore. You get higher returns but whatever benchmark or numbers you're using just won't be calibrated for what you're likely to deal with in some of these neighborhoods.
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Jonathan R.
Investor · Wichita, KS · Member since 2017 · 584 posts · 813 votes
8y
Originally posted by @Shiva Bhaskar:
I would use the crime maps on Trulia/Zillow, and contact local police, or look up FBI crime stats. But more than that, walk around and see how you feel.
There are lots of C areas where you have some break in or assault here and there, but many good blocks to be found. But a D to F area, with gangs and real violence, stay far away.
I know some people use the test of "would I live there", but that will limit you. I live in an A- areas, and I'd never do deals here, but I happily invest in B- and C areas.
D's get degrees in college; and D's bring in huge cash flow for residential single family homes with the help of the government's section 8 program. I agree to the F area with heavy gang presence. If you can buy the whole block in an F area and make the block nice, that might be something worth doing.
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Sam Shueh
Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
8y
Call your insurance guy see if he can find out about insurance claims from past. Try Crimereports.com fo9r recent type crimes and sex offenders live in the area.

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Eric M.
Flipper/Rehabber · Louisville, KY · Member since 2008 · 1k+ posts · 1k+ votes
8y
Originally posted by @Jason Baldwin:
@John M. Thank you John. That is what I was thinking. The stats from the website didnt line up with the local reviews and google street view.
Hmm, you think you can tell what the crime is like in a place based on google street view?
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Jason Baldwin
OP
Rental Property Investor · Denver, CO · Member since 2018 · 14 posts · 6 votes
8y
@Eric Michaels oh no. Not at all. Its just one more tool to get a feel. Seeing broken down cars in yards with no tires, graffiti on walls, general condition of surrounding properties, etc... It helps if you're not there, but NOT a complete picture.
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Noel Challenger
Realtor · Paterson, NJ · Member since 2017 · 134 posts · 97 votes
8y
There's a trade off to everything in the real estate investing business. If you buy in a low crime highly desirable area then you most likely won't cash flow because price you bought it at is too high. Likewise if you purchased in a high crime, least desirable area then it is difficult to attract good tenants that would ideally pay rent on time (it can be done though). Also you are more prone to deal with vacancies and a high turnover rate of tenants because people are constantly moving from place to place in these areas.
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Linda S.
Investor · Richmond, VA · Member since 2016 · 1k+ posts · 2k+ votes
8y
@Jason Baldwin,
Everyone has their limits.
To find out more about the area, I'd suggest looking up the local sex offenders, if there are a lot nearby-- it shows it's a rougher area with lower limits. Check the local news/crime for the area-- where we invest, 90% of the time, the bad stuff only in certain areas. Another thing, is where are the section 8 housing? Not just a house, but the large multifamily buildings/low income only housing? We don't like to buy nearby those.
We heavily rely on Trulia's crime map, and use that as a answer when people always ask "is it safe?" ... we tell them, "according to Trulia, it's the safest in the area." Hope this helps!
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Shiva Bhaskar
Investor · Los Angeles, CA · Member since 2017 · 523 posts · 476 votes
8y
Originally posted by @Jonathan R.:

Originally posted by @Shiva Bhaskar:

I would use the crime maps on Trulia/Zillow, and contact local police, or look up FBI crime stats. But more than that, walk around and see how you feel.
There are lots of C areas where you have some break in or assault here and there, but many good blocks to be found. But a D to F area, with gangs and real violence, stay far away.
I know some people use the test of "would I live there", but that will limit you. I live in an A- areas, and I'd never do deals here, but I happily invest in B- and C areas.
D's get degrees in college; and D's bring in huge cash flow for residential single family homes with the help of the government's section 8 program. I agree to the F area with heavy gang presence. If you can buy the whole block in an F area and make the block nice, that might be something worth doing.
Hi Jonathan, I agree on this to a certain extent - I think we do much better with D properties if it's local though - for example, I would consider one here in Los Angeles, where I know the area, housing authority etc, before I would out of state, but I'd happily do a C+ area out of state. But yes, if you could turn around an F neighborhood would be great - just tough in my view, but a huge return for whoever could pull it off.
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Jason Carter
Rental Property Investor · Culver City, CA · Member since 2012 · 403 posts · 246 votes
8y
@Jason Baldwin Of course you want to check all the sites and pound the pavement yourself but this is also a case where you can use the power of relationships. I've walked neighborhoods mid-day that seem perfect only to find out they are crime-ridden. I recommend hitting up as many investors (local and out of state), agents and managers as you can and try to get that insider knowledge. For example, from this thread alone, if I'm interested in Vegas, I would DM @Account Closed and ask for more specifics. Then I would search for more investors there and do the same. That will lead to agent and manager recommendations. Hit them up too. If you're going to invest out of state, it's important to find people you trust and get their opinion. And share any information you find with those investors - create win-win relationships. Not only will you get a better understanding of your market but this can lead to new deals, new partners on deals, friendships, etc. In other words, it opens doors.
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Anthony Wick
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
8y
How high is too high? When it happens to you, or one of your properties. But seriously....I just looked at a place two days ago. The abandoned house next door (boarded up but with a wide open front door) was too high to me. I wasn't nervous in the neighborhood, but it felt like I would need to visit my rental every single month in order to collect the rents. So I passed.
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