The Direct Impact School Systems Have on Property Value
There are many variables that come into consideration when deciding to purchase a property. Location, size, renovations, outdoor space and neighborhood are just a few of the factors that heavily weigh on buyers' mind when making a decision. Among those important factors, school districts have played an increasingly significant role in property potential. When you consider families with small children, or couples planning on starting a family, this makes sense. However, purchasing a home in a solid school district is beneficial for those who fall outside of this criteria as well.
Whether you are purchasing a primary residence, fix and flip, or a long-term rental property- it is important to know everything that affects your property value. This includes both internal and external data. The National Association of Realtors shows that 26% of recent homebuyers are influenced by the quality of their school district when selecting where to live. That percentage jumps to 46% for buyers ages 30 to 39, and by 36% for buyers ages 22 to 29. To the real estate market this means: higher buyer demand, better sale price, and the potential for a bidding war if it is a great house in a coveted school district. Even if you don't have school-aged children and this doesn't benefit you directly, being aware of the school district situation can help you position yourself to earn more on the sale of your home due to increased property value.
According to a study published by BiggerPockets.com, a real estate investor studied schools on SchoolDigger, which uses a five-star rating system based on student to teacher ratios, enrollment, test scores, and various other factors. Schools that had a rating of four or five stars were almost completely insulated from declining home values during a recession, whereas those with one to three stars experienced significant losses. Knowing this, it will be far easier to sell your home for what it is worth during market volatility. During times when the market is strong, you may even be able to command an above-market price point simply based on the school district where your home is located.
A common phrase in the real estate world is “Location is everything.” The more desirable the school districts, the more desirable the property. As a prime example of this phenomenon, homes that are located in a top-tier school district in Los Angeles sell for an average of 79% more than homes in an average school district nearby. The National Bureau of Economic Research reveals that for every $1 spent on school funding, property values increase by around $20.
On the other hand, purchasing in an area with a highly desirable school district often comes with higher property taxes. This is important to factor into your data when calculating return on investment. The School District though, is just a factor, not a scarlet letter on whether or not you should purchase the home. Some buyers, like retirees, land investors, home flippers, and other people who don’t have an immediate concern with educating their children will be attracted to lower property taxes that come from living in a less-desirable school district. Since property taxes often go up based on the quality of the school district, you may want to stage your home for sale to this particular segment of the market if you don’t live in the best school district.
With any grand decision in life, knowledge is power. Gather as much data as possible in order to make an informed decision when purchasing real estate. When weighing out your options on an investment property, be sure to ask as many questions as possible. Although a property might seem like your dream home, it is never a bad idea to get a non-bias opinion. Seek advice and consult from industry experts such as real estate agents and lenders.
