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Written by 9rules Blog on March 28, 2016
Real estate investors are always looking to identify connections between property features and property values in order to target profitable investments that can deliver maximum returns. And while some features are obvious – such as location, square footage, and number of bedrooms – others aren’t quite as apparent. One such feature is the presence of a home security system.
Understanding the Value of Security
While a home security system gives the renter or homeowner peace of mind, it can give an investor a higher return or financial kickback. Exactly how much depends on a number of location and company-specific factors, including the following:
1. Neighborhood Density of Security Systems
According to a study conducted by the School of Criminal Justice at Rutgers University, the real value of security systems is that they’re actually able to protect entire neighborhoods. The study, which analyzed homes and security systems for the better part of five years, found that residential break-ins actually decrease as the density of alarms increase. In other words, the more security systems there are in a neighborhood, the less likely it is that any home in the neighborhood – even an unsecured one – will be broken into.
How do burglars know when security system density is high? Well, it typically comes down to physical signs and trial and error. If lots of properties on the same street are scattered with home security signs and stickers, this is likely an indication that the area is heavily secured. Secondly, if burglars attempt to break into multiple homes in the same neighborhood and set off alarms, then they tend to assume the rest of the neighborhood is also protected.
This ultimately goes back to the importance of investing in safe neighborhoods. Unfortunately, the safe will get safer and the dangerous will only get more dangerous – as the presence of crime encourages additional crime. While there are strategies for investing in low-end housing where crime is high, you should never do so with the anticipation that the area will suddenly become safer.
2. Insurance Kickbacks
Did you know that home security systems actually add value to a property in the form of insurance kickbacks? Yes, most insurance companies will offer discounts on monthly premiums when a security system is present. These discounts can be as much as 20 percent in certain situations. Depending on your premiums, this can amount to a few hundred dollars per year. For a long-term hold investment property that you’re trying to cash flow with renters, this can be a major difference on your balance sheet.
3. Type of System
Not all security systems are created equal. While many homebuyers will consider the presence of an alarm system when purchasing a new home, they don’t value all of them the same. A pre-wired and installed system with motion detectors is valued much higher than a DIY solution that’s simply screwed into the wall and can be easily removed.
It’s also important to remember that home buyers aren’t going to pay that much of a premium for a security system. Most security companies will offer free installation and equipment in return for a new contract – and most buyers know this. In other words, if the investment property has a system in the home – great. If there isn’t one, then don’t bother installing one.
The Value of Security
It’s hard to put a price tag on security. It’s even more difficult when you’re talking about security in the form of an investment property. While there’s a certain amount of intrinsic value connected to having a security system on a property, it’s clear that the real value is in the safety of the surrounding neighborhood.