Should I be messing with properties in medium or high crime areas?

10 Replies

Many of the wholesale deals and distressed properties that I come across in Columbus, OH are in areas with medium to high crime.

I am hesitant to do anything with these properties because I don't know how to take advantage of them. I am really not interested in dealing with tenants or rentals. 

I will consider wholesaling and rehabbing but as long as I know it will pay off. Also, I'm a new investor and haven't done my first deal yet.

How should I approach these properties to make them profitable without dealing with rentals?

Should I even be considering them?

Dominic - I was just in Columbus and Dayton today. It's a great area in general although somewhat rainy this past month. 😃 Let me preference my response by saying that I believe there will be a variety of opinions on your question. With that in mind let me share my opinion. I think there is a difference between a low income area and a medium to high crime area. My first personal deal was in a low income area of Tampa, FL. It was not a crime ridden area but the homes were in disrepair. That said the home was close to many areas to work including Busch Gardens and so I have never had a hard time renting it. While I personally would not hesitate to invest in a low income area if the deal made sense, I would be much more careful of an area that is known as a crime area for several reasons to include but not limited to: ability to flip the home, rent the home, liability issues, personal safety issues and damage potential. Never say never but I would be hesitant to invest in medium to high crime areas. As you are just getting started my recommendation would be to keep looking between Columbus and Dayton as I am sure you will find deals in safer areas. Dave

I agree that it is all situational, but a medium-high crime rate area makes it difficult to do anything and scares many people away.  high risk of being broken into and gutted etc.

It really depends on the neighborhood. In Columbus I see a lot of potential in Franklinton and the near east side, particularly Olde Town East and anything North of I70. Stay away from Linden and anything east of I71. There's not any room for appreciation and the housing is capped at what you can flip for. I just saw a property go up for sale in Franklinton for $90,000 fully rehabbed. I looked on the auditors site and the guy bought it for $10,500 Dec 30. People are being priced out of Clintonville, Short North and Campus and are moving into "transitional" neighborhoods. There's still a lot of deals for those who see where the population is trending.

@Dominic LobbanI would recommend trying to wholesale these properties.  I don't think it's a good area to do your first flip.  Make sure your numbers are correct for the deal, maybe even approach a fellow investor that may be an end buyer or would know an end buyer before getting it under contract and asking him/her what he/she would pay Before getting it under contract.  Best of luck to you! 

Preface: my day job is in law enforcement, at the street level.

Most big cities have crime mapping websites that show exactly where each type of crime occurred. Any apartment complex is going to have a lot of car burglaries, for example, because most of the residents have to park outside. So if you are looking at a SFR with a garage, but it's surrounded by apartments, you might not actually have a lot to worry about, even though it's technically a high crime area. Robberies and residential burglaries are always going to be a big deal though, but break it down if you can. A lot of thefts mights just mean there's a Walmart nearby.

So I'm going to rehash what my mentor has told me. There can be successful investments found in high crime areas. As a tenant, if you're aware and you're very close to a transportation point (I live in NYC so the subway is an example), then it's generally fine. And I have heard several accounts of people living just fine in areas mapped out as high crime. 

Look into the neighborhood. If it's not in the heart of where all the crime is (or even better, it's in a spot where it could possibly turn over and gentrify), then it may not be that big of a factor.

There are opportunities everywhere and probably more in these areas.   You have to find out what your risk tolerance is and go from there. For me I don't invest in the 2 worst areas of my County but everywhere else is fair game.  Some areas can be rough and I've had break in but I try to limit them as much as possible.  Fact of the matter is I've had stolen good from good areas too so it's all about mitigating risks and for you that might be not investing in certain areas.  

Also potential profits come into play.   If you have the potential to make $75k in a medium crime area or $30k in a low crime area which would you take.   In this situation the extra $45k may be worth the added risk.  So there are more than one factor at play,  other than just an area is good or bad. 

There's still really good margins in Columbus.  The demographics support it.  Low unemployment, above average median income, increasing population in Franklin county, Capitol of Ohio, Ohio State, top rated hospitals etc.

Many people are being priced out of the nicer areas and going to Franklinton and Near east side

Most distressed properties are in those medium and high crime areas. There is a correlation between distressed properties and crime. 

You can wholesale in those areas, just recognize that your target buyer is most likely a landlord, and you will need to price accordingly.

For retail flips, focus on better neighborhoods.