Crime Rate - How high is too high?

[Jason Baldwin]

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?

[Jim K.]

@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.