How the Growing Crime Rate Can Deter Quality Tenants

Part 1: Understanding how increased crime affects tenancy

Today, there’s more to consider when choosing your investment

Every investor’s ideal is to have a property that is low maintenance, high income and attracts quality, long-term tenants. When tenants are looking for a place to live, they consider many things. If you want to attract and retain quality tenants who care for your property, you have to make your property have “the whole package.” In today’s unstable socioeconomic climate, you also have to consider aspects that are outside of your control.

Quality tenants want to live in a safe area free of violent crime with access to the goods and services that complete their lifestyle. However, with the rising rate of violent crime and social unrest, investors need to assess more than a property’s propensity for providing long-term income growth—they need to clearly understand how crime is impacting the area they’re prospecting down to the street the property is on.

Why crime is up

In 2017, The Morning Call reported an uptick in violent crimes in Allentown which kept pace with the national averages. However, there were decreases in violent crime for Easton and Bethlehem according to the same 2016 FBI uniform crime report. Depending on who and how the numbers were compared, the overall outlook was positive from most city politicians.

Things have changed since 2016. From bold daylight smash-and-grabs to emboldened protestors, we are currently experiencing a toxic cocktail of political and social unrest accelerated by an unprecedented global pandemic. The workforce has also taken a dramatic shift in how work has evolved, whereas many people now choose lifestyle and the ability to work from home over city-centric living. Large corporations are liquidating office buildings and their corporate workspaces to meet this new work-from-home trend, causing many remote workers to leave crime-ridden cities for safer, more appealing areas.

The Lehigh Valley is one of the most attractive regions for this remote workforce. It’s still close to the cities they love, Philadelphia and New York, however, the reduced requirement to be near the corporate office has widened their choices for more appealing places to call home. When populations of cities shift, crime can increase and take more of a stronghold, which is what we’re seeing happen in many cities over the last two years.

The CDC reported that from 2019 to 2020, the U.S. murder rate increased 30%, the largest year-over-year increase ever recorded. Pennsylvania’s rate rose in the range of 31-45% from 2019 to 2020, and six in ten Americans say violent crime is a major concern. Increased crime is a reality for all of us.

Good news for aware investors

Not to be all gloom and doom, there is good news for investors who are realistic and study the crime rates of the locations they are investing. When investors become aware of the crime statistics and trends of a town or neighborhood, they are better equipped to find properties that appeal to higher quality tenants seeking safe places to live.

With inflation, more potential home buyers will pause their plans and remain renters, at least for the time being until the economy shifts more to their favor. Again, more good news for investors, however, these same renters are becoming more discretionary about what they choose. Many are willing to increase their monthly budget to be in a safer, more stable community with access to services and amenities, including a robust municipality that provides ample coverage of fire, law enforcement and EMS.

The key is to think like a tenant when assessing a new deal. Consider all of the aspects of the property’s potential, not just the long-term income potential.

Summary

We are all hopeful that crime never impacts those close to us or our tenants. When you’re evaluating the pro forma of a potential deal, look at the property from the perspective of a tenant. Assess the property’s safety, the neighborhood’s crime rate and the city or town’s municipal response capabilities. Talk with the people who know the area and can give you a realistic idea of how crime has impacted the area from a marketability standpoint. Crime can turn a good neighborhood with great properties into a less desirable place to live, making it difficult to attract the high-quality tenant. 🏠

Part 2: How to Crime Proof Your Investment Property (next week)

Related Research and Resources:

Terry PappyComment