Does a City’s Crime Rate Affect Your Airbnb Profitability? | Tim Hubbard

How important is crime in the neighborhood or near your short term rental? That's what we're going to jump into this week.

Welcome to Short Term Rental Riches. We'll discuss investing in real estate, but with a specific focus on short term rentals. Quick actionable items to acquire, manage and scale your portfolio. I'm your host, Tim Hubbard. Welcome back to the Short Term Rental Riches podcast. Here we are another week. Thanks for joining in. Once again this week we're going to talk about some fundamentals of a city where you may potentially want to purchase a property, but we're going to focus on one and that is crime. How important is that actually to the success of your short term rental? Does it make a huge impact or not? I want to give you my personal experience in the cities where I have properties, but also my experience living and traveling around the world. So before we jump into that, I want to talk about a new source that you may want to look at to get some of this information and also to get some other information about a potential city or even down to a zip code. And that source is called Neighborhood Scout. If you haven't heard about it before, they compile information on different markets. They have real estate information in there. In fact, they have information on several aspects. Before we get into it, I'm not sponsored by Neighborhood Scout or anything like that. It's just one more resource I wanted to share with you guys to help you in your property search and to help you make better informed decisions. So the first thing that Neighborhood Scout does is gives you an overview of a city. If you're at the city level, you can break it down to a zip code. But the overview is nice because it gives you a little more information about that city. If it's new, it'll talk about the most expensive neighborhoods and it puts rankings and things like that in there. So it gives you a good overview. It talks about real estate specifically and it talks about the highest appreciating neighborhoods. Now I haven't looked at all the reports. As far as I know they have information across the US but the ones that I was looking at had information on appreciation since 2000, since the year 2000. So that's a pretty good historic record. If you remember, we had big crash in 2008, 2009 in the US so that's enough information for us to see how much that city was really affected by appreciation. How much did it swing? We know that California and the coastal places, they got hit a lot harder during 2008, 2009 crash. Than maybe a lot of places in the Midwest. So take a look at that. And if you're looking at purchasing or investing in a new city, that's another thing we want to be cognizant of. Now, of course, I don't talk about investing for appreciation on this channel. We talk about cash flow. But hey, it's not too bad to have a great cash flowing property. That's also appreciating a lot too. Right? That's, that's a win win right there. So in the real estate section of Neighborhood Scout, it's going to talk about this. It's going to talk about the number of homes in that area and the average price, the average market rent, which I think is fantastic to know because as you know, if you've been listening to the podcast for a while, I like to get properties that also work as long term rentals. And so I need to know what that long term rent is going to be. It also talks about rent versus own percentages, which is great. Typically in an area that has more renters, the rent is probably going to go up a little higher than in places where people are primarily owning because there's a bigger renter pool. Right. Number three, the third section talks about demographics and it'll break it down. Millennials, different age ranges. This is important to know too. There's a lot of little intricate cassis in here. I don't want to go into those, but I just want to provide this source and let you guys know that you can get this information real easily at your fingertips. It also talks about industries, so employment industries. And that's super important to a real estate market also. Right. I think personally a really good industry to have in a city is healthcare. Because we have an aging population, the baby boomers are going to need health care. And healthcare is not something you can get remotely. Right. You can't go to the hospital virtually, not yet anyways. We'll see things. You know, technology just keeps coming, but at the moment you need to be near health care. And for older baby boomer population, a lot of them are moving to these areas that have good health care. And so that's, that's a good sector to have in your city. The fourth one they talk about is schools to be slightly less important for us if we're looking for places to rent short term. But if you're looking for that backup option as a long term rental, then being near good schools is helpful for finding longer term tenants. Now the big one the neighborhood scout breaks out is crime and that's one that I want to break down a little bit more. I get asked all the time how important crime is in the area where you have your short term rentals. So I want to just break it down. First off, I want to say I'm living, or I live about half the year in what was once called the most dangerous city in the world, and that is Medellin, Colombia. And I've lived there for the last five years. Not everything is what the news makes it out to be. That's all I got to say there. The narco episodes and narco series on Netflix and stuff, of course, don't help the reputation for that city. But those stats were back from the 90s. So this is a moving thing, right? Like, places get better and places can get worse. So I really enjoy living in Medellin. It's one of my favorite places in the world. But it has a reputation of being super dangerous. So compared to what? Right? I mean, you got to compare it to something else. Now. I also really like spending a ton of time in Brazil. And people, actually lots of Brazilians, will say Rio de Janeiro is very dangerous. And I've heard this myself. I know friends have been pickpocketed and things like this, which can happen anywhere. Usually that happens in more touristy places in the US Included. I love going to Rio, and so do hundreds of thousands of tourists every year. I don't know if that's going to slow down. I don't know if that's going to stop because people think it's dangerous. Of course, there's things we want to be cognizant of. If we're in a new area, we don't want to be flashing, you know, Rolexes around and holding our cell phones in the air. You know, the more modest we are with everything, the less we have to worry about these things. But it's really, you got to relate it to other places. So a lot of. You know, I also have properties in Memphis, Tennessee. Actually, that's where most of my properties are. And guess what Neighborhood Scout says in terms of its safety rating? Well, they say it's in the top 1% of safest neighborhoods in the U.S. that sounds weird. That basically, if we flip that terminology around, it means it's the top most dangerous place in the US or it's at the first percent for crime all across us. So it's in last place. So I know that my rentals have been very, very successful there. And it really comes down to your property and your neighborhood. So just Because a city might be dangerous or, you know, a city can have millions of people. So we really got to look into this further and not just take a crime rate for what it says. And I think the ultimate way you might be asking, okay, well, you know, this is what the crime rate says. This is that the ultimate way to determine if your potential property is in a good area or that you would feel comfortable renting out a property in this area is to go stay there, find an Airbnb in that same neighborhood and stay there for a day or two days and then make that decision. Do you think it's dangerous? We do have people that comment on our properties and say, you know, it didn't feel safe, by the way. Also, if someone comments and leaves your review and says the neighborhood was not safe, you do have the potential to have that review removed because your property, according to Airbnb rules, doesn't have anything to do with the neighborhood. So it's out of your control. So just a little quick tip for you there. But our guests that stay with us longer, if they're in a neighborhood that doesn't feel safe in the beginning, right when they show up, and then they stay there for one day, two days, three days, the longer they stay, the more safe they feel. So if you're thinking about a potential property and it's an area you're unsure of, go book a property in that same area. You need to know what kind of guest is likely to book in that same area. But then make the conclusion, do I feel safe here or do I not? And if you don't, then I would not make that investment, at least as a short term rental anyways, because that is important. Safety is important. So check out Neighborhood Scout. It is free for a lot of information at the city level. If you break it down on a zip code level, then they will charge you. They block certain areas, but basically it's anywhere from like 40 to $100 plus per month. It's on a monthly thing. So you can probably get by with, you know, 30, 40 bucks to get a whole bunch of information about a city that you're thinking about. And to me, that that's definitely worth it. So check out Neighborhood Scout, and if you see a bad crime rate in a city that you're thinking about, don't take it for its face value. It may be that the neighborhood you're looking to invest in is fantastic and no one has any problems with it. But the real way to determine that is to go ahead and stay there. So hopefully this gave you a little more insight. And until next time, thanks for tuning in again and have a wonderful.

Sam.