How Crime Rates Affect the Real Estate Market

Many factors affect a potential homeowner’s decision to buy a house, but one of the most important is safety. Neighborhoods with low crime rate are much more attractive than those with a higher tendency for crime.

Crime and the Real Estate Market

Because housing markets fluctuate due to a plethora of different factors, it is difficult to pinpoint the exact role of crime rate in the overall health of a market. However, there is one common thread that was discovered in a 2010 study by researchers at Florida State University. They found that robbery and aggravated assault most highly influenced housing values across different neighborhoods. Another study from the University of Troy found that an area’s home prices fell 0.25% for every 1% increase in violent crime.

Another interesting trend is that sometimes crime rate in one city can affect the real estate prices in another. For example, if City A slashes their police force in half and crime rates rise, neighboring City B may experience a spike in home prices because of people moving to that city. This happened in California back in 2008.

Potential Homeowners

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It’s not uncommon for homeowners to research an area’s crime rate before house hunting in that region. They would rather know in advance than be surprised after they move in. A history of high or rising crime rates may also take these areas off a homeowner’s option list entirely. When this becomes a pattern, it leads to the overall decrease in an area’s property value.

Pittsburgh Crime Rates

Unfortunately, Pittsburgh has one of the nation’s highest violent crime rates across all communities. In the entire state of Pennsylvania, you have a 1 in 316 chance of being a victim of a violent crime. In Pittsburgh, your chances jump to 1 in 126. Pittsburgh residents also have a 1 in 30 chance of becoming the victim of a property crime, such as burglary, theft or motor vehicle theft.

Crime Prevention Methods

When the residents of an area understand how crime affects their property values and other aspects of the community (such as business, school quality, etc.), they’re more invested in finding effective methods for crime prevention. Two common examples are neighborhood watch programs and after school programs to teach good habits from a young age. If you’re concerned about your neighborhood’s safety, get involved with the community to find solutions.

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5 Updates Landlords Shouldn’t Make

Marble countertops, shiny tiled floors, and a brand-new patio: while they might be pretty, upgrades like these won’t help your bottom line. If you plan to invest and maintain a profitable rental property, you’ll need to strike a balance between updating the space and minding your budget.  By creating an appealing setting, you can make more of a profit by increasing the rent – however, if you stray from updates to full-scale renovation, you might end up dealing with a property that costs more than it earns. Here are a few renovations that investors shouldn’t make on a rental property.

  1. Adding a Swimming Pool

A pool may seem like an ideal addition to the backyard, but it won’t necessarily increase the value of the home. The feature can also take away space in the backyard for pets or children to play in on the property and make it seem unattractive to families who lack the time or resources to maintain it.

  1. Room Addition

According to loans.usnews.com, room additions don’t always pay off due to the high cost of the construction. Projects with a lower price tag – such as appliance updates and repainting – tend to have a better ROI for landlords.

  1. DIY Projects

From painting the walls to installing new sinks, DIY projects are cost-effective at a price; while they may seem cheap at the outset, they often look they were performed by someone who had a lack of experience and ultimately turn away would-be tenants. It’s necessary to leave the work to professionals to ensure that your money is an investment that pays off and attracts more tenants in the coming years.

  1. High-Maintenance Landscapes

According to Time Magazine, creating a beautiful garden benefits the aesthetics of a home – but it doesn’t justify increasing the rent that you charge. It can also require a significant amount of money for landscaping services to upkeep the property or the tenants may not want to spend their weekends pulling weeds and watering different areas of the yard. Stick to landscaping that is easy to maintain to ensure that you don’t waste your money if you’re renting out the house.

  1. Upgrading Everything

Many landlords make the mistake of upgrading everything and assuming that the home needs to have all new features or materials to attract good tenants. Overspending on upgrades can make the house appear too chic and regal for the local area, making it necessary to keep the upgrades to a minimum. Stick to adding new fixtures on the cabinets or new hardwood floors in the living room to make upgrades that are minimal, yet aesthetically effective.

 

*Originally posted on JasonCohenPittsburgh.net

Writing a Business Plan for Your Real Estate Investing Business

When it comes to investing in real estate, there are many things that you should do before even looking at properties. At some point, you will need to write a business plan. Often thought of as a map of a business, these plans work as a guide. The plan should be fluid. As circumstances change, so can the contents of the business plan. Not only will you, as a business owner, want to review this periodically, investors will also want to review the plan. At Jason Cohen Pittsburgh, we start every investment with a written plan.

Normally business plans are divided into smaller sections allowing the writer and the reader to focus on the section that is most important at the time. The most common sections are a mission statement, goals, strategy, market, criteria, exit strategies and backup plan, and financials.

The mission statement is possibly the most important section of a business plan. It should answer the questions of why, what, where, how, and when. If you are at this point, you have most likely answered most of these questions — it’s now you need to write them down. Though it will lead the business plan, the mission statement is usually written last. It will serve as an executive summary of the entire report. If you are presenting this to investors, the mission statement may be the only section they read. Grab their attention in this section by giving a solid statement of your business.

The goals section should be as concise and as clear as possible. The goals should be tangible, so you can track success. Separate the goals into short-term and long-term. Remember, you can always update this section as the world around you changes and you adapt to it.

Following the goals section, define your strategy. This section will answer what type of investment property you plan to use to create a profit. This can be a single-family home, multi-family home, a small apartment building, or a large apartment building. When you start your business, stick to one strategy. By picking one strategy, you can master it. After you are experienced in real estate investing, you can diversify into multiple strategies.

A definition of the market area should be a section included in a real estate business plan. By dissecting the market in which you will execute you business, you will uncover possible risks. This section should answer questions about the demographic of your market, the future of your market, and the competition within your market.

The criteria section will give you a chance to go into details about what type of deal you are looking to use as an investment. Define the maximum purchase amount, the maximum rehab amount, and the maximum timeframe to hold on to the property.

An important section to include in your plan contains exit strategies and contingency plans. This section is not only important to you while conducting business but investors tend to focus on this section. Detail whether you plan to buy and hold, flip the property, rent the property out, etc. To cover all your bases, imagine multiple scenarios and multiple exit strategies.

Include a section containing a description of the financials of the business. The financial section should include a listing of any equity that you can use and a summary of the financials at a point in time. You can either include how you plan on finding financing in this section or add a separate section.

Organize the sections in the best way that you see fit, but always lead with the mission statement. By taking your time writing this plan, you can use the real estate investment business plan as a tool while going through the day-to-day operations, like we do at Jason Cohen Pittsburgh. Not only can a good business plan entice investors — it can help you build your business with cohesive strategy and goals.

Should you invest in stocks or real estate?

Now that the real estate market has made huge strides in the way of recovering from the Recession, its appeal to investors is growing again. All over the nation, people are looking for ways to turn their money into more money. And real estate is looking like a better option every day.

But, which is safer — real estate or stocks? Where can you get the greatest return? And how much time are you willing to devote? At Jason Cohen Pittsburgh, we are clearly in the real estate camp for ourselves. But is it the right investment for you?

Familiarity
Unless you come from a family in which stocks and bonds were discussed at the dinner table, chances are you’re more familiar with real estate than the stock market. You see homes sitting on the market every day. You know how they can necessitate work when you see a pipe freeze, a roof leak, or a floor wear out. It’s tangible. Stocks are figurative. They exist in another space. When they go bad, it’s just as palpable — but not as visual. You may already know how to repair damages in a home.

Control
Unlike stocks, that are subject to the whims of the market and business decisions made in boardrooms far from your office, you have some level of control over your real estate investments. Sure, weather and human error can wreak havoc on a home, but you can be insured against a great deal of the damage.

Time Commitment
Though real estate is generally familiar and fixable, this also means that it is more high maintenance to the investor. You may already know how to repair a damaged bannister, but do you have the time? Stocks and bonds are far removed from your daily life. Aside from monitoring them, they are a nearly effortless investment.

Steadiness
While stocks have generally proven to yield higher returns on investment, they are prone to extreme fluctuations. This can cause a novice investor to panic. Real estate values usually do not skyrocket or hit rock bottom. Their steadiness brings comfort to the investor. You can’t open the paper in the morning to see that the value of your investment property has plunged.

Diversity
You hear the creed of “diversify” from every financial advisor. Because you can invest less money in each stock than in a single real estate property, you have more opportunities to diversify your investment portfolio. Real estate investors generally invest in a certain geographical area. Therefore, if this region takes an economic downturn, all the investments go with it. Investing less in stocks offers less risk.

Unless you love all the risk and work that goes into real estate investing, the stock market may be a better option for the casual investor. But if you’re like us at Jason Cohen Pittsburgh, and you live for turning that distressed property around, then real estate investing is the path for you.