Real Estate Investing

How Much Does a School District Affect Property Value?

April 4, 2018

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Do School Districts Affect Property Value?

The question of how much a school district affects property value is murky and has been subject to much rigorous debate. But that a high-performing school district will attract renters and buyers alike is no question at all. Although landlords know that the majority of their clientele are younger demographics yet to settle down or start a family, they also know that this trend has been upended in America over the past decade. When looking for properties to invest in or wondering what the prospects for ones you already own are like for the future, one of the most important factors to consider is the local school district.

More families are renting.

More and more people in the United States are renting instead of buying homes, and for a variety of reasons. This trend can partly be credited to the sensibilities of millennials, who are less likely to commit themselves to a certain property or city, preferring to keep a more mobile lifestyle. Another reason is that millennials are struggling to accrue the capital necessary to buy a house and pay off mortgages. Already, single-family rentals have jumped up from 31 to 35 percent of all rentals since 2006. As such, single-family rentals are one of the most important facets of the market, and property managers should be taking note. That means property managers should assess how attractive their properties are to potential families, and what the market value of such properties are.

A good school district is highly coveted.

All real estate investors know how much renters value location. But while proximity to retail is becoming less important to renters, proximity to schools remains critical. A 2013 survey found that over 90 percent of home buyers said school boundaries are “important” or “somewhat important,” and that many are willing to go over budget if it means they’ll land in a desirable school district. Such statistics aren’t only promising for the obvious revenue streams it can mean for property managers, but also because such sensibilities by potential renters have staying power. Education is important for parents today and will continue to be tomorrow. Coupled with the fact that many people are willing to look past clear downsides of a property, there’s much space for landlords to get a reliable revenue stream going.

So how much are values affected?

A study conducted by the National Bureau of Economic Research found that for every dollar of per-pupil stat aid, relevant housing values increased by about $20. For landlords with properties in a coveted school district, this should be music to their ears. Families are increasingly looking at schools’ performance records in standardized testing and following the promise of an education that will best prepare their children for college.

Change your business model accordingly.

Property managers looking to expand their business should keep two things in mind: the increase in single families looking to rent, and their willingness to pay top dollar to access to high-performing school districts. Buy-and-rent is already looking like an increasingly more profitable practice than the traditional buy-and-flip when it comes to single families. When you factor in education’s effect on the market, a property with undesirable aspects that would traditionally have property managers looking down the street can be worth considering as the market continues to change.

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2 thoughts on “How Much Does a School District Affect Property Value?

  1. I’m looking to expand my rental portfolio and am considering school districts in my decision. Do you have any resource suggestions when it comes to school district research?

    1. Hey Deborah, first and foremost, the resources available to you will depend greatly on your location. For broad information provided by a national source, is a great site. USA Today also provides school district performance tracking and ranking. A suggestion, particularly as it pertains to property value, is to actually look at the history of levy’s in the area. A district that regularly passes levys will inevitably raise the value of the properties located there. This can result in higher property tax, but it will also lead to greater return on principal and more demand for rentals. Hope this helps!

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