Evaluating Neighborhood Crime for Real Estate Investors

When investing in real estate, understanding the safety of a neighborhood is crucial. The Crime Dashboard helps investors determine the safety level of a neighborhood by focusing on two major categories of crime:

Types of Crime That Affect Real Estate

Personal Crime (Directly Impacts Property Values & Rents)

1. Murder

2. Rape

3. Robbery

4. Assault

Property Crime (Affects Rents but Less Impact on Property Values)

1. Burglary

2. Larceny

3. Motor Vehicle Crime

How Do We Evaluate Crime in the Neighborhood?

While a vast amount of crime data is available, much of it lacks actionable insights for real estate investors. Some sources provide detailed crime reports pinpointing locations and types of crime, but this granular approach is overwhelming and inefficient.

Another common approach reports crimes per 100,000 people, but without local context, these numbers are difficult to interpret.

So, we applied a real estate investor’s mindset: Show me the comps.

In real estate, we use comparable (comps) to determine:

• Property Value – Analyzing recently sold properties in the area.

• Rents – Examining recently rented units in similar areas.

• Construction Costs – Comparing contractor estimates.

For crime evaluation, we apply the same approach. We compare crime rates locally and nationally to give real estate investors a clear picture of risk.

Neighborhood Crime Comparables (Comps)

1. National Comparisons – How does this neighborhood rank in each crime category compared to all other neighborhoods in the U.S.? This allows investors to compare it to areas they are familiar with.

2. Local Comparisons – How does this neighborhood rank in each crime category compared to all other neighborhoods in the metro area? This gives insight into how prospective tenants might perceive the area.

How to Interpret the Crime Dashboard

Each crime type has two graphs to provide a comprehensive risk assessment:

1. National Rank (Left Graph – Speedometer Style)

• This graph shows where the neighborhood ranks for a specific crime compared to all other neighborhoods in the U.S.

• A higher rank means more crime relative to national standards.

2. Metro Area Rank (Right Graph – Local Risk Assessment)

• This graph compares crime levels in the neighborhood relative to all neighborhoods in the metro area.

• This helps determine how prospective tenants and local residents view safety in the neighborhood.

Interpreting Crime Data: Key Rules for Real Estate Investment

National Crime Rankings:

1. Personal Crime

   • If a neighborhood ranks above 80% nationally in any personal crime category, it is a high-risk area for investment. Proceed only if you have a very high risk tolerance.

   • Lets take a look at 3 Neighborhoods to understand this.

In the graphs above I would invest in Neighborhoods 1 & 2 but would NOT in Neighborhood 3 as this would be too risky and my income stream would be questionable.

2. Property Crime

   • If a neighborhood ranks above 80% nationally in two or more property crime categories, it may not be a good investment.

Metro Area Crime Rankings:

3. Personal Crime

   • If a neighborhood has 20% more crime in two or more personal crime categories than the metro average, it is a sign to stay away.

IN the two graphs above for the Metro Area comps I would invest in Neighborhood 1 because the Murder Rate for the Neighborhood is lower than the one for the Metro Area. I would NOT invest in Neighborhood 2 because the Murder Rate is more than 20 points higher than the Metro Area’s.

4. Property Crime

   • If a neighborhood has over 20% crime in all three property crime categories (Red Bar), consult a property manager before proceeding.

Final Thoughts

Crime data is essential for making informed real estate decisions. The Crime Dashboard simplifies this process by providing meaningful comparisons, ensuring that investors can identify safe and profitable neighborhoods.

By focusing on national and local crime comparables, investors can confidently assess risk levels and make smarter investment decisions.

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