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How can you effectively assess real estate investment risks in high-crime areas?

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Real estate investment can be a lucrative venture, but it also comes with significant risks, especially in high-crime areas. As a facility manager (FM), you need to evaluate the potential returns and challenges of acquiring, managing, and selling properties in such locations. In this article, we will discuss how you can effectively assess real estate investment risks in high-crime areas using four key steps.

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Mohamed Saed

Deputy Director- Assets managment, Shopping Malls at Talaat Moustafa Group Holding- Certified Mall manager, MBA, PMP -…
Jahanzaib Qureshi

Manager Facilities| Unilever, Frieslandcampina Engro, Tapal |

1 Identify the crime types and trends

The first step is to understand the nature and extent of the crime problem in the area where you are considering investing. You can use various sources of data, such as police reports, crime maps, neighborhood associations, and local media, to identify the types, frequency, and patterns of crime that affect the property and its surroundings. For example, you may want to know if the area is prone to violent crimes, such as homicide, robbery, or assault, or property crimes, such as burglary, theft, or vandalism. You may also want to know if the crime rate is increasing or decreasing over time, and if there are any seasonal or temporal variations.

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2 Evaluate the impact of crime on property value and performance

The second step in real estate investment is to assess how crime affects the value and performance of the property. Crime can have a negative effect on marketability, income, appreciation, and liquidity. It can deter potential buyers, tenants, and visitors, reducing the demand and attractiveness of the property. It can also reduce rental income and occupancy rate, as well as increase operating costs due to security measures, insurance premiums, and maintenance expenses. Additionally, crime can lower appreciation potential of the property while also increasing depreciation rate due to physical damage, obsolescence, and stigma. Lastly, it can make it harder to sell the property as well as reduce the selling price and profit margin. To estimate the impact of crime on these aspects of real estate investment, you can use various methods and tools such as comparable sales analysis, income approach, cost approach, and discounted cash flow analysis.

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3 Mitigate the risks and challenges of crime

The third step is to devise and implement strategies to mitigate the risks and challenges of crime on your property. You can use a combination of physical, technical, and social measures, such as installing locks, gates, fences, lighting, signage, alarms, cameras, sensors, and monitors. Additionally, you can screen and select tenants, enforce rules and regulations, foster community engagement, collaborate with law enforcement and other stakeholders to create a safe and positive environment. Furthermore, it's important to consider obtaining adequate insurance coverage, conducting regular inspections and audits, and maintaining contingency plans and reserves to cope with potential losses and damages.

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Mohamed Saed

Deputy Director- Assets managment, Shopping Malls at Talaat Moustafa Group Holding- Certified Mall manager, MBA, PMP - soft skills trainer
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From a very basic SOWT analysis and customers needs. Security is threat , customers looking for safe living Enviroment, accordingly the key success factor is establishing a strong well integrated security solution ( physical & technical) - CCTV CAM. - monitored gates - patrolling regime - local authority daily communication and update. And above all communicating all the above to the residents for awareness

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4 Monitor and review the results and outcomes

The fourth step is to monitor and review the results and outcomes of your risk assessment and mitigation strategies. You can use various indicators and metrics such as crime statistics, property performance, and property value. Additionally, you can solicit feedback and suggestions from tenants, staff, and partners to evaluate their satisfaction and perception of the property and its security. This information can be used to identify strengths and weaknesses in your approach, allowing you to make adjustments and improvements as needed.

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5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Jahanzaib Qureshi

Manager Facilities| Unilever, Frieslandcampina Engro, Tapal |
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As real estate investment advisor one must look that crime in particular area is permanent or temporary based, Some time due pollical rivalries or any other reasons, area become violent, In Karachi Pakistan, it is visible. then one should make a investment decision, don't just discard investment option immediately. You have to see what kind of investment you are making, manufacturing plant, corporate office or residential colony, various crime effects in different ways to these areas, Suppose if there is plant that is viable to be built in particular area, due to cheaper labor or solar energy, it can be built and security can be tightens via guards, route safety and cameras and with coordination of district administration.

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How can you effectively assess real estate investment risks in high-crime areas?

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2

3

4

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1 Identify the crime types and trends

2 Evaluate the impact of crime on property value and performance

3 Mitigate the risks and challenges of crime

4 Monitor and review the results and outcomes

5 Here’s what else to consider

Facility Management (FM)

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How can you effectively assess real estate investment risks in high-crime areas?

1

2

3

4

5

1 Identify the crime types and trends

2 Evaluate the impact of crime on property value and performance

3 Mitigate the risks and challenges of crime

4 Monitor and review the results and outcomes

5 Here’s what else to consider

Facility Management (FM)

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