How big a factor is crime rate when getting a rental property?

Question

Hello, my name is Jose Gallegos and I am new to real estate investment and am excited to learn.

My question is how big a factor is crime rate when buying a rental property? I am seeing some great deals when plugging it into the calculator but am thinking it would be hard to get tenets in neighborhood with higher than average crime rates. Any thoughts or advice on this?

Steven Foster Wilson · Answer

@Jose Gallegos here in Columbus OH the neighborhoods are street by street. Its good to have a boots on the ground presence to know, is this area good or bad. Even if the neighborhood is up and coming, if youre on the wrong side of the street, you could be screwed.

Don't just go off of online crime maps.

Kenneth Garrett · Answer

@Jose Gallegos

I look at two important factors crime and school ratings.  In general, areas that have good school ratings have lower crime rates.  You also need to evaluate the crime rates.  Is the crime rate predominately in one area of town bringing the entire city down.  There are pockets in every city where crime is high and extremely low.  You’ll need to break down the crime rates into areas.  It is a personal choice.  I live near Chicago.  Statistically Chicago has a high crime rate, but there are neighborhoods where crime is extremely low and of course where it is extremely high.  Conduct your due diligence and evaluate the area.

Remington Lyman · Answer

I have only been investing in Columbus, Ohio for 3 years and it is crazy how well I have gotten to know each street. I remember being a college student at The Ohio State University and only knowing the University District and Downtown neighborhoods.

Anthony Wick · Answer

Everything has a price point. Just be prepared that your tenants may be the ones committing the crimes...

I actually think it has nothing to do with if you'd live there. Now, I buy nicer properties in areas that I would live, but many landlords buy in very low economic areas and do very well. You just have to be prepared for the headaches.

Jonathan Klemm · Answer

@Jose Gallegos - Of course, you have to factor in the crime rate.  In heavy crime areas, you tend to have more issues, the property will likely require more maintenance, harder to place tenants, and possibly trouble collecting rent if your tenants aren't properly vetted.

Timothy Frazier · Answer

@Jose Gallegos

Most of that is already going to be built into the market already.

Nice area with nice schools = high sales prices and high rents.

Bad area with bad schools=low sales prices and low rents.

There’s not many areas with high crime and bad schools where the property values are sky high. Maybe some inner city neighborhoods that are being flipped where people don’t have kids but that’s about it.

In general like everyone said it’s all about the type of tenant you can attract. In general you’ll probably find just on paper there’s good numbers in lower income areas which there can be. But the appreciation over time won’t be as good. And you’ll want to factor in more of a higher vacancy rate and higher annual maintenance expense due to more tenant related issues. If you’re basing your purchase price on a desired cap rate you may want to raise that cap rate higher for neighborhoods like that too.

Just my two opinion.

Jeremy Wirths · Answer

@Jose Gallegos I think that is investor specific. It all depends on your comfortability with the area. But a couple things to ask yourself: Would you live there? Would you live there with your children? Do these properties you are looking have currently have tenants? The crime rates that you are looking at - do they include in their numbers all the phone harassment/stalking/drama complaints and drug possession? I'm not advocating for drug use but marijuana is looped into the same complaint in most computer systems so for everyone getting cited for having mj that comes across as drug activity - because it is. Everyone has their own opinion of this topic.  Are you looking in to the actual factors making up the number or just the number? What percentage of the rate is actual crime not just complaints/misdemeanors?

Theresa Harris · Answer

If you wouldn't be comfortable living there or walking around at night, you are going to have problems placing a tenant (or at least a good one).  As Kenneth said look at schools and crime; also look at the condition of the houses-do people take pride in their homes, are the yards kept up, houses in good condition. They don't have to be mansions with manicured lawns, but you don't want a bunch of garbage and broken down vehicles in the yard.

John Morgan · Answer

My best properties are in bad hoods with terrible schools. I fill them immediately when I buy them, and always have multiple applicants. These people stay forever, so I have zero turnovers which saves me. And in my area, C class hoods are in bigger demand and appreciate better over time.

Mario Morales · Answer

There are risks, as everyone has mentioned. I have investments from low to high crime areas. 99% of my late rental payments come from the high crime areas. I house hacked and then moved out, it was a sacrifice as I didn't go out at night and when I parked my car I made sure to look both ways BEFORE getting out of my car to get to the door. With that experience I learned a few things, cashflow maybe better (theoretically ) but evictions are higher (had 2 of them) and lastly as I invest now, any deals that I look at... and yes I may lose out on some opportunities, I have to be comfortable going to that neighborhood to deal with whatever may be needed. If I invest in high crime areas, I will use a property management company. A lot of smarter people than me are able to do it, but I don't want to do it again, I prefer the "B" class areas.

How big a factor is crime rate when getting a rental property?

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