Alpharetta, GA · Member since 2018 · 14 posts · 2 votes
How important it is in the screening process for buyers investors, to look for investment properties that are located ONLY in a good school district areas really? especially when you see lots of properties in the neighbourhood that were leased relatively quickly ( in 2-30 days) - numbers are working to the investors ! Also Townhomes in this community sell quickly and over asking price ! what are your thoughts on that? Working with first time investors !
Census.gov, smartasset.com (for property taxes), usa.com (for growing cities and crime. also has extra info), neighborhoodscout.com (also for crime rate). You could also talk to RE agents in the area to help find good neighborhoods as they know a lot more about the location
I spent a lot of time trying to figure out how to cast more than one vote for this post. I couldn't...and I apologize for it. This is one of the best, most direct statements I've seen on this board.
The home owner and the tenant are the only ones that care about this. REI shouldn't. Why? Because each market is different. Each market's schools system impact the residents differently depending on who those residents are. Not all residents care about the school district. How can you tell if the school district matters? You can't. What you can tell is if that market will make you money. Enter the cash flow and/or the profit.
Then again, maybe the cash flow and profit is the way the residents are telling us if they do care.
Rental Property Investor · Camas, WA · Member since 2020 · 284 posts · 202 votes
5y
@Joe Villeneuve
I see what you are saying Joe and you have quite a bit more experience than I do but I think some who look towards appreciation over cashflow may focus on things like school rating and crime statistics.
I see what you are saying Joe and you have quite a bit more experience than I do but I think some who look towards appreciation over cashflow may focus on things like school rating and crime statistics.
Rental Property Investor · Bloomington, MN · Member since 2019 · 404 posts · 542 votes
5y
@Maayan Cohen This will sound weird, but give me a chance to explain... in my area it will typically make sense to avoid the top school districts for real estate investing.
Top school districts seem to matter more for home buyers than to home renters. Therefore, a home in the top school district might cost $100,000 more, but only bring in an additional $200 / month in rent. I wouldn’t pay $100k to get $200/month.
That’s just single family homes. For apartments, the majority of renters typically will not be families. So they won’t care about school districts.
With all this said, you also don’t want to be in the worst school district, but that’s not because of the school itself. That’s because of the other things that come with bad districts like crime, etc.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
5y
In my area, when it comes to one of the six or seven better school districts in the area, location in that district very much determines the difference between a B and a C-class property.
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
5y
I only invest in " Good " school districts , not the "Great " school districts . Thats what rents my properties . Families WANT the area I rent in . All mine were off market deals at good prices . Very good appreciation also . I have no interest in buying properties in cheaper areas around or in Baltimore , the additional cash flow doesnt make up for the headaches and little appreciation those areas have .
I see what you are saying Joe and you have quite a bit more experience than I do but I think some who look towards appreciation over cashflow may focus on things like school rating and crime statistics.
That doesn't change anything. Higher PV due to better schools usually means higher taxes to...which cuts into the CF. Appreciation is a percentage based on the PV. If you buy 1 property worth $500k, using $100k DP, or 5 $100k properties with 20% DP at $20k/ea, and all the properties appreciate 10%, both option gained the same amount of dollars.
Many CA investor uses school district to buy an investment property. They're not looking for cashflow as a way to generate cash as they already cash cashing them in their main business :) but they're looking for appreciation and asset preservation.
Rental Property Investor · Camas, WA · Member since 2020 · 284 posts · 202 votes
5y
@Joe Villeneuve
I agree with your statement but as Carlos pointed out below. My experience in CA was good school districts appreciate much faster than mediocre school districts. So that 100k and 500k house appreciated at 20-25% vs 250k houses appreciating 7-10%.
Again depends on what your goals are. If you are looking for cashflow. Or a specific category of renter, say single or older couples vs families it would really change what criteria you look for in a property.
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
5y
That percentage isn't fixed in stone, nor is it a regular occurance. The only numbers that matter are the ones with $$$ in front, and the only ones with $$$$ infront that matter are the spreads....which really means it comes down to the terms. If you are buying rental properties and only focus in on the appreciation, you're losing a large part of that type of property's reason for being.
Let's say we both have the same $100k to start out with, and you buy 1 property worth $500k (in a high everything area), and I buy 5 properties worth $100k each (in an area with good everything). Your property cash flows at $8k/year and each of mine CF's at $5k/yr. Your higher property values are due to all the best of everything, which in many cases (like schools, insurance, etc...) leads to higher property taxes to pay for those schools. Your mortgage payment is also higher than mine, so your costs are higher than mine per month. Your property appreciates at 20% per year and mine at 15%. Here's what we are looking at:
Factors\Option Best Almost Best PV per property $500k $100k # of Properties 1 5 CF per property $8k/yr $5k/yr
End of year 1: Appreciation/property $100k $15k Total appreciation $100k $75k Total CF/year $8k $25k Total profit year 1 $109k $100k
Don't get too excited. That was year one ONLY. REI isn't a one year investment, nor is it the same every year. Since your DP's needed are $100k to buy your next $500k property, your either have to wait until you accumulate that much in CF, or dip into your pocket...which means your cost goes up.
In my case, I can buy my next property using the CF from year one (DP = $20k...and I still have $5k left over). This also means it doesn't cost ME anything since the money I'm using comes entirely from the CF...the Tenant's money. This gives me 6 properties, all appreciating at 15% and all having $5k in CF.
End of year 2: Factors\Option Best Almost Best # of Properties 1 6 Appreciation/property $120k $17k Total appreciation $120k $102k Total CF/year $8k $30k Total profit year 2 $128k $132k
End of year 3: Factors\Option Best Almost Best # of Properties 1 7 Appreciation/property $144k $20k Total appreciation $144k $140k Total CF/year $8k $35k Total profit year 3 $152k $175k
End of year 4: Factors\Option Best Almost Best # of Properties 1 9 (extra prop using extra CF) Appreciation/property $173k $23k Total appreciation $173k $207k Total CF/year $8k $45k Total profit year 4 $181k $252k
Real Estate Agent · Westchester, NY · Member since 2021 · 77 posts · 35 votes
5y
@Maayan Cohen
It's a must for us for smaller buildings. Larger buildings, not so much. Why? Because with a smaller building, we need to be able to fill that vacancy immediately so the cap rate stays up. Larger buildings have a bit more leniency with vacancy because one unit being vacant doesn't affect our cap rate as quickly.
Also - we avoid rougher neighborhoods no matter the district. Why? Because unless a bunch of landlords or property owners band together, it is hard to pick the neighborhood up out of the dumps which will always reflect in resale value, rent and appreciation.
Good School Distict
Pros:
•quicker resale process
•faster appreciation
•quality of tenants may be skewed towards those with less turnover
Property Manager · Baltimore, MD · Member since 2014 · 1k+ posts · 1k+ votes
5y
I do not factor school districts into my analysis at all. If your main goal is to maximize appreciation, then I think schools are something to consider, but assuming you're looking for cashflow first and foremost I would simply focus on ARV and monthly rent comps. The buyers/tenants have already factored things like crime, schools, transportation, etc into what they're willing to pay.