Price in security systems for buy-and-hold residential rental?

Question

Newbie investor, looking to purchase my first rental in the next few months in greater Denver. In researching my submarket, one dilemma I've encountered is a perception of higher-than-average crime. I thought installing a security system might assuage these fears, but I don't want to take on added hassle or eat into my projected cash-flow. I'm wondering how others handle this. Here are some specific questions on my mind:

Do I price in the monthly security charge as a tenant-paid utility? Or do I cover the cost? (not like using more water or electricity, it's a fixed utility cost).

Who handles communication with the security company in the event of an alarm, the tenant or myself?

Any other guidance would be appreciated. And if you're in Denver, let me know! Coffee on me.

Thanks!

Steve K. · Answer

Aurora does get a bad rap as a whole, but mostly due to East Colfax, and also Montview and Havana hoods which people conflate with all of Aurora. I often hear people casting aspersions like "all the crazy people are from Aurora" and the theater shooting didn't help that reputation. It's actually partly based in fact that Aurora has a lot of crazy people because it became a haven for the mentally insane population that was relocated from Capital Hill in the latter half of the last century. But Aurora is more than just East Colfax, in fact it's actually larger than Denver itself (in land area), and contains an extremely wide spectrum of neighborhoods from swanky-modern new urbanism to housing projects to suburban McMansions to trailer parks. So when people lump all of Aurora into one category and make a sweeping judgement like people there are crazy or it has bad crime, they are really over-generalizing. I think the bad reputation is leftover from the days when East Colfax was the place to go for hookers and meth (so I'm told), and people still conflate East Colfax with all of Aurora. We've seen so many Denver metro area hoods shed their bad reputations in the last 20 years: Highland which was kind of rough then became hipsterville which spread to West Highland and now Sunnyside, Berkley, Sloan's Lake etc. in the Westerly direction, Five Points was basically considered a no-go zone 20 something years ago now it's almost fully been gentrified, RiNo was an industrial wasteland now it's obnoxiously trendy and Cole and Commerce City are in the path of progress in the Easterly direction... I think Aurora is ripe for a similar "makeover" in terms of updating public perception. Certain areas within the city are already quite nice despite the overall reputation. The many "gritty" neighborhoods in Aurora that are currently transitioning into "trendy" are bound to see steep appreciation, according to my crystal ball at least.

I haven't invested anywhere in Aurora yet personally but I am not opposed to it and I have several friends that did really well buying apartment buildings around 2011 that they sold recently for triple what they paid. I have been consistently hearing certain areas of Aurora being mentioned as the best places to invest in the whole metro area right now, especially for the house hacking crowd as there are a lot of affordable large houses in up and coming type neighborhoods.

I've been all over Aurora and even the very worst parts shouldn't be considered that bad at all, by national standards at least, in my opinion. I have honestly been searching for a real ghetto since I moved to Colorado in the early 2000's, purposefully seeking out the parts with bad reputations. I haven't found anything that comes close (using the legit ghettos of the East Coast where I'm from as my point of reference), so I've become convinced that Coloradans simply just don't know what an actual ghetto is and label areas like Aurora as bad out of sheer ignorance of what actual bad is. The worst areas I've seen are probably the homeless encampments along the bike path between RiNo and North Washington/Commerce City, but it's just gross due to the combination of industrial waste and human waste, not really dangerous in the drive by shooting sense. Sure there are plenty of low-income areas that are pretty rough around the edges: Federal Heights, Commerce City, Athmar Park, Westwood, Montbello, Gateway, parts of Thornton etc... the list of not-very-nice areas is actually quite long but there's really nowhere I wouldn't feel safe going into like you find in most other big cities, except maybe LoDo at 2am when all the bars are closing down and the streets fill up with drunken bros, or the parking lot of Mile High Stadium after the Broncos lose to the Chargers.

One thing that is definitely not safe anywhere in Denver metro though is your bike. It seems like bike thieves are lurking behind every bush and shrub. You might offer your tenants a LoJack system for their bikes as bike theft is probably their biggest risk, but then you'd rob them of the rite of passage experience of having their bike stolen. I've heard you're not a true Denverite until you've had your bike stolen.

Zac Garthe · Answer

@Nick Pass Thanks for the recommendation! I think it makes sense to have both tenant and landlord receive notifications.

@Karl B. That is a great idea! If I can lower the insurance cost, it could off-set the price of the security system.

@Steve K. I'm glad you found a clever solution to your problem. And thanks for the recommendation on the cheaper systems. I'll definitely take a look. As far as sub-market, I'm looking at parts of Aurora. There are some nice areas in Aurora, but a lot of people I talk to flinch when I mention the city. Have you invested there and if so, any tips?

Steve K. · Answer

We had a security issue at a Denver metro area property a few years ago (some dumping in an alley and some graffiti on a shed) and believe it or not just hanging a sign that reads "This area monitored by video surveillance" along with some "No Trespassing" and "No Dumping" signs actually did the trick, haven't had any problems since.

I think some of the security systems such as Ring and Simplisafe are as inexpensive as $10-15/month these days however so shouldn't eat into profits that much. You might be able to have alerts go to both you and the tenant. I don't have any experience with these systems because our signs were cheaper and have worked superbly.

Just curious, which area of Denver are you looking into that has a "perception" of higher than average crime? I remember when most of the buildings in Highland had bars on street-level windows, and not many people wanted to live there... hard to imagine that now!

Karl B. · Answer

Another bonus is once installed be sure to request an alarm certificate from your new security system company and submit that certificate to your property insurance provider - a majority of the time you'll receive a lower insurance premium when you have a security system (you can call them in advance to inquire about the lower premium as that might well sway you to sign up for the security system).

Nick Pass · Answer

@Zac Garthe I know a guy in Denver that does Vivint. Basic 2-3 door sensors, motion sensor and a panel for $250-$300 upfront and only $39/ mo with no contract.

On my properties I connect the tenant as 1st emergency contact and 2nd emergency contacts. However I’m always the 3rd. I know some landlords even stay connect to the alarm on their units with an app just to monitor things but don’t include cameras (though that’s an option).

With tenants moving out and that you buy the system you’ll be able to transfer the system to new tenants without a hassle.

Installation and set is cake and very manageable without having to drill holes in walls or doors. Panel mounts on a countertop.