Dealing with crime

[Seth C.]

I have a couple of medium sized MF deals available to me with solid demographics in terms of renting. There are a number of universities etc. nearby. However, the apartments are on the fringe of a high-crime area. They have gated parking etc. because of this, but crime still infiltrates. These properties appear to be high cash-flow properties, and one of them might even work with partial owner financing. 

My question is, when is it worth tackling crime (if ever), and is there some way to estimate financial impact? Depending on lease terms it may take 1-2 years to clean up the apartments themselves, but it is impossible to clean up the entire area. These apartments are 90%+ full right now but can be value-add as well. C property in B- to B neighborhood bordering on C- neighborhood, all taken in local terms--it is a high-crime city.

[Account Closed]

that's only a question you can answer.. but in the meantime I would get more info on the crime in the area.  Did you speak with property managers at neighboring properties?  Did you go the police station and ask the cops?  you'll get a much better picture of the real crime in the area.

btw.. I have found that crime stats posted on the internet sites that MF investors use is often wrong.. as in dead wrong.  literally.  so you need more boots on the ground intel.

[Seth C.]

The crime is real, but you are definitely right. I need more PD feedback. I have some renter information, but that can be tough to filter at times!

[Steve Olafson]

I have had 5 different properties in high-crime areas.  Multi-family becomes very tough here.  Owners and managers are the rich and greedy people in conflict with the residents.  That perception is difficult to break.

I only buy in good locations now.  Much easier and actually turns out to be better cashflow.

I had enough drug dealing, shootings, assaults on the managers, stolen autos, keyed cars, graffiti, and verbal altercations to last a lifetime.

There was one manager that was very successful with the residents.  He hosted easter egg hunts, barbeques, and other events.  He was a total tenant advocate but that did get him in trouble at times.  All - in - all, he managed a great cashflow property.  But, it is not easy to do what he did.  He was above and beyond in his duties and time for the company.

[Account Closed]

i would agree with Steve on this..   avoid high crime areas.  ideally you want a C property in an A neighborhood or at least a B neighborhood.   more upside and less hassle.

things to consider in a high crime area.

1. how many of the complexes have been condemned and taken over by the city?

2. do neighboring properties hire security overnight?  this will give you an idea of what you're dealing with.

3. are the code inspectors going to be up your butt as the new kid on the block?  check with the city about code violations.. and enforcement on the property.  - you'll be surprised on what can of worms this will uncover in your due diligence.

[Jordan T.]

This probably won't help except as an interesting story.  I listened to a podcast today (Old Capital Lending podcast #1, I think) where an apartment buyer in a high crime area took all of the leases to the police department and had them run the social security numbers.  A couple of days later, the police blocked the exits and took away 15% of the tenants in handcuffs, solving a lot of his crime problem right away.  

In another complex, he had video cameras up throughout the complex, and when a large fight broke out in the parking lot, he evicted all the tenants involved in the fight.

[Michael Noto]

You hit the nail on the head when you mentioned in your original post that you can fix up the units, but not the entire area.

These kinds of properties are not worth the hassle in my opinion.

[Seth C.]

@Jordan T.:
Yeah, there are creative ways to speed things up! At the same time it sounds like almost pure philanthropy when you count in opportunity-cost. It would be very satisfying to extend a good neighborhood or solidify it's borders, but perhaps when I have hit my goals for the decade ;).

As an aside, how do I mention someone in the forums without hitting "quote"? I tried hyperlinking to their profile, but it is just a plain hyperlink....

[Red Brown]

@Seth C.if you hit the @ then?  List of posters comes up and hit one you want

[Seth C.]

@ does not work for me ... but that must be because the page never finishes loading from overseas. At least I know what should happen!

[Jordan T.]

@Seth C. The @ worked for you in your reply to my comment.

[Seth C.]

@Jordan T.:

Yeah, I hit the "quote" button and then delete everything....

[Andrew Kerr]

@Seth C. - I use raids online to look at crime data when I am considering buying in a low income area. It gives me a feel of what is actually happening. It lets you break it down by type of crime, date and area.

[Seth C.]

@Andrew Kerr, nice resource. Unfortunately it does not have my target area, but it will be great for many people.