Crime rates are an important indicator to analyze when looking for an investment property. Buying in a high crime area can be risky not only to you, but also to your investment. We’ve certainly known a few A/C condensers to mysteriously grow legs and walk off.
Not only can crime cost property owners through thefts and break-ins, but high crime generally reduces the values of properties in a given area. A study from the Center for American Progress, for example, found that a 10 percent reduction in homicides resulted in an 0.83 percent increase in housing values the following year.
This is not to say that you can’t make money in areas with higher crime. Indeed, we have a good number of investments in areas with a relatively high crime rate. There are still plenty of good people in those areas that you can make money renting or selling to.
But the important thing is to know what you are getting into in the first place. The worse thing you can do is buy in a high crime area when you think it is a low crime area — which leads to the first key thing to do before you start investing.
1. Decide What Areas You Want to Invest In
The “close your eyes and throw a dart at the stocks section of the newspaper” is not a particularly effective strategy. (OK, maybe it is for stocks, but not for real estate.)
If you don’t know what you’re looking for, you’ll never find it. It is important up front to decide what kind of risk tolerance you have and what types of areas you are willing to invest in. Do you want to go into luxury housing, Section 8 housing, middle-class housing, etc.? The riches are in the niches, so it’s usually unwise to bounce around aimlessly. With regard to crime, the question is, “How high a crime rate are you willing to tolerate?” You need to answer this question ahead of time.
2. Crime Websites
Once you’ve decided on what kind of areas you are looking to invest in, you can start to research them. The first place to look is online.
Websites such as CLRSearch.com, NeighborhoodScout.com, and HomeFair.com can give you all sorts of information about a zip code, from median prices and per capita income to vacancy rates and, of course, crime rates.
Unfortunately, these sites only break down that information by zip code, and zip codes can be rather large. Sometimes parts of a zip code will have a high crime rate, and other parts will have a low crime rate.
City-Data.com, on the other hand, has a mapping feature that can give you much more specific information.
Unfortunately, while this feature can give you a subdivision by subdivision account of median income, it only has crime data by zip code.
3. Crime Mapping Websites
There is a whole host of crime mapping websites out there including:
It’s probably worth looking at these sites, although I have always been a bit suspicious of them. For one, they just show a map with reported crimes dotting it, which makes it hard to compare one area to another. Second, I’m not confident that all of the relevant data has been obtained and is being shown. So while I think these maps are worth looking at, I wouldn’t make any decisions based solely on them.
4. Driving the Neighborhood
Google Earth is a fantastic tool, but I would caution against using it to draw conclusions about a neighborhood. A still frame picture usually makes a place look better than it actually is. For one, if an area is dilapidated, it very well may smell bad, and you can’t detect a stench from a picture. Trash blowing in the wind or troublemakers loitering about also doesn’t come through very well in one picture.
In the end, there’s simply no comparison to actually being there. Even if you want to invest from out-of-state (something you should be very careful doing, by the way) you should go to wherever you want to invest first. Driving around a neighborhood can give you a very good feel for how good and how safe it is.
Things to look for include:
- Vacant, boarded up buildings (if they are boarded up, that likely means the owner is afraid they will be robbed)
- Many burnt or seriously dilapidated buildings that aren’t being repaired
- Cages around A/C condensers
- Bars on windows or doors
- Trash on the streets
- Lots of graffiti
Also make sure to stop by a local convenience store or two and look to see if the cashier is behind Plexiglas. That will tell you a lot.
If you want even more information, drive around at night and see if it’s calm and people are walking their dogs or going for a jog or if it’s either completely empty (people likely nervous to go out) or very rowdy (people likely causing trouble).
5. Talking to the Neighbors
The people who know the most about a neighborhood are the ones who live there. Many of them would just love to talk your ear off about their experiences or about kids these days. Don’t be shy in asking the neighbors how they like living in the area or how safe they think it is.
Just be prepared to get an earful.
6. Other Investors and Property Managers
If you aren’t attending your local real estate club, you should start. Same goes for any property manager groups in your city. These are some of the best people to ask what it is like owning properties and how bad the crime is in different parts of town. The BiggerPockets Forums are a good place to ask that as well.
7. The Police
Police departments can be a great source of information on various areas, particularly if you are looking to buy an apartment building. Many police departments will give you a list of the calls they’ve had on any apartment if you request it. So if you are evaluating an apartment in an area you think it s a bit questionable, this is absolutely something you should do.
In addition, many police departments allow for citizens to do ride-alongs. In Kansas City, MO, for example, residents can apply to do a ride-along once a year. This is a great way to see what exactly the police are dealing with in your city, and there’s no better person’s brain to pick regarding crime than a police officer. And, by the way, if you know any police officers, you should definitely ask them what they think about any given area as well.
Again, it’s important to remember that a higher crime rate doesn’t necessarily mean it’s off limits to invest in. But what is critical is to know what you are getting into before you get into it. The above tools should allow you to determine the crime rate of any given area and to go into any investment there with your eyes open.
How do you analyze markets for crime? Any additional tools you use?
Let me know with a comment!