School Ratings for Rentals.. important or no?

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School Ratings for Rentals.. important or no?

Colleen Weaver
Atlanta, GA · Member since 2018 · 19 posts · 7 votes

Hi! I am looking to buy my first rental property as soon as I can find the right deal. Question for experienced rental property owners out there- is school rating important when it comes to a rental property? Is it a deal breaker or a non issue? What are the pros and cons- and for people that have owned rentals in good AND bad school districts, do you see a difference in cash flow or vacancy rates? 

I am coming from the flip world where schools make all the difference. Just wondering if the same rules apply for rentals. 

Thanks!!

- Colleen

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Account Closed
Rental Property Investor · Canton, OH · Member since 2017 · 1k+ posts · 1k+ votes
7y

@Colleen Weaver

Deal breaker = NO

Does it Matter = YES

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  • James Murphey
    Waipahu, HI · Member since 2018 · 121 posts · 81 votes
    7y

    Good question.  I would think it would depend on the demographic of that area usually.  If the area is next to a college. I would not worry as much about it, as you will probably be renting to students, professors, and grad students. If average age of the population is 40s and the industry of the town is usually something that allows people to have a family. I would be more concerned with the school situation.  In more family oriented towns, it seems like a huge deal.   People usually paying rent are more concerned with saving money in the short run then which I would think make them less concerned with schools, but no parent wants to send their child to a school with a bad reputation.  There are a lot of variables to consider in this question.    

    3Reply
  • Account Closed
    Rental Property Investor · Canton, OH · Member since 2017 · 1k+ posts · 1k+ votes
    7y

    @Colleen Weaver

    Deal breaker = NO

    Does it Matter = YES

    9Reply
  • Bob Anderson
    Phoenix, AZ · Member since 2017 · 18 posts · 22 votes
    7y

    I don't pay too much attention to school ratings and here's why;  the school ratings are by default already factored into the fair market value of surrounding comps.  So a 1500 sq foot home in a good school district might cost an average of 200k, but the same sized house in a different school district might only cost 150k.  Therefore I don't really care if its a good school district or not, I only care if I am able to buy the house at below market based on legit comps.

    4Reply
  • Scott P.
    Rental Property Investor · Indiana...mostly · Member since 2019 · 468 posts · 245 votes
    7y

    Assuming you're renting out an SFR, I think the school ratings would matter most for an area with very high SFR prices and a very, very highly rated school system. You could potentially attract a long term renter who wants that school system but can't afford to buy in that area.

    I lean toward trying this strategy but I have not specifically done it yet and I don't have hard data to prove it is a good strategy.  

    2Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y

    It's not necessarily a deal breaker but quality schools attract quality tenants. More importantly, families will stay in place to keep their kids in a good school so they are more likely to be long-term renters.

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    7Reply
  • Colleen Weaver
    OP
    Atlanta, GA · Member since 2018 · 19 posts · 7 votes
    7y

    Thanks everyone!! 

    0Reply
  • Jonathan W.
    Los Angeles, CA · Member since 2019 · 512 posts · 301 votes
    7y

    @Colleen Weaver a few houses We have had probably have like 5 inquiries a day maybe a little less. Rented them out quickly.

    We had one in a great school district

    I kid you not, my phone range about three times an hour average. Must’ve been like 25 inquiries the first day

    0Reply
  • Pat L.
    Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
    7y

    Agree with @Jonathan W.

    we have the same problem with several of ours in a great school district. NEVER vacant & mostly word of mouth referrals.

    0Reply
  • Colleen Weaver
    OP
    Atlanta, GA · Member since 2018 · 19 posts · 7 votes
    7y

    @Pat L. And @Jonathan Watt

    Thank you for the info! Question to both of you- does this apply across the board to all neighborhood classes? (I am looking primarily in C class areas). What has been your experience?

    0Reply
  • Anthony Wick
    Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
    7y

    @Bob Anderson

    I like your points. However, if the cash flow is about equal, a good school district will have more appreciation and better tenants. I’d need higher cash flow in a lesser quality school district.

    0Reply
  • Anthony Wick
    Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
    7y

    @Colleen Weaver

    How are you finding C class properties in good school districts? C class are in lesser quality school districts. Hence, they are C class.

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    7y

    @Colleen Weaver school ratings are a good indicator of the neighborhood quality. Specifically local elementary schools. 

    1Reply
  • Colleen Weaver
    OP
    Atlanta, GA · Member since 2018 · 19 posts · 7 votes
    7y

    @Anthony Wick My apologies- I should clarify!! “Good” should say “better”. I am looking at C class neighborhoods that have 4 school district ratings vs. a 2 or 3 (believe it or not even a 1) rating. You are correct- I have not found any 5+ schools in a C class area. So even if it’s not a “good” school, some schools are better than others and I am just trying to figure out how much of a difference the ratings make/ how much focus to put on this factor. 

    0Reply
  • Pat L.
    Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
    7y
    Originally posted by @Colleen Weaver:

    @Pat L. And @Jonathan Watt

    Thank you for the info! Question to both of you- does this apply across the board to all neighborhood classes? (I am looking primarily in C class areas). What has been your experience?

     Ours are not C-class. When we bought the multi unit we inherited some really bad tenants & yet the one psycho sent their kid to a private school?? Now we have amazing tenants a those with kids chose our units because of the school district. Nevertheless most C-class tenants are still usually attuned to school districts so it's a good idea to stay within those districts. Yet we did have a local kindergarten-3rd grade school overwhelmed & abandoned by local residents because off a large influx of asylum seeking illegals, but that's another story. 

    1Reply
  • Bob Anderson
    Phoenix, AZ · Member since 2017 · 18 posts · 22 votes
    7y

    If the 200k home with a good district and the 150k home with a mediocre district both cashflow 150/month, then the 150k home is ALREADY providing you with more cash flow.  Sure the raw number of 150/month may be the same, but you have to spend an extra 50k to achieve the same raw cash flow in the good school district which alters your ratios.

    So in the end the C class asset will cashflow better, and the A class will probably appreciate better.  It then comes down to investing strategy.  Do you subscribe to the thought process of cashflow is king, or do you bet on calculated long term market appreciation?  How much time do you want to spend babysitting C class tenants and how much entitlement can you stomach from your A class.  How much cash do you have available to purchase a home in an A neighborhood, versus a cheaper one because its a C class etc. 

    Going for the A class isn't a better strategy, or a worse strategy.  In the end you will make money with both assets, just in different ways.  Cashflow versus appreciation.  I don't care which method gets me there, as long as I DO get there.  Therefor I still don't care about school districts and if it's an A class or C class.  As long as it's a good deal then it's worth buying. 

    2Reply
  • Anthony Wick
    Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
    7y

    @Bob Anderson

    Mine are Class B. Neither troublesome or entitled. Lol.

    0Reply
  • Colleen Weaver
    OP
    Atlanta, GA · Member since 2018 · 19 posts · 7 votes
    7y

    @Bob Anderson thank you for the insight! Your thinking is similar to my thought process. I’m looking at lower entry numbers- as I am just starting out- if I completely miscalculate I’ll only have 200k at risk in a C class vs. 600 for an A class neighborhood. My strategy is simple- have the renter pay off the mortgage to own the property free and clear in 15/ 30 years. Any market appreciation is a bonus in my mind. The taxes in ATL are really high in A class neighborhoods (as I’m sure they are everywhere) but it takes a huge chunk out of the cash flow for those properties. Thanks again- I appreciate the response!! 

    0Reply
  • Colleen Weaver
    OP
    Atlanta, GA · Member since 2018 · 19 posts · 7 votes
    7y

    @Pat L. haha it sounds like you’ve got some good stories!! Thanks for the feedback.. quality of tenants is definitely something to consider! 

    0Reply
  • Jonathan W.
    Los Angeles, CA · Member since 2019 · 512 posts · 301 votes
    7y

    @Colleen Weaver I only deal with B class sfh but I imagine anyone with a family cares. Plenty of parents who can’t really afford or qualify for our rental homes apply just because they want that school district for their kids.

    I swear, I’d rather they save the money and buy the kid a book but whatever

    0Reply
  • Colleen Weaver
    OP
    Atlanta, GA · Member since 2018 · 19 posts · 7 votes
    7y

    @Joe Splitrock I didn’t think about focusing on elementary schools.. Thanks for the tip! 

    0Reply
  • Colleen Weaver
    OP
    Atlanta, GA · Member since 2018 · 19 posts · 7 votes
    7y

    @Jonathan W. That’s definitely what I see with my flips.. better schools sell much faster and with fewer upgrades. Wasn’t sure if rental would be similar. Seems like the answer is yes and no haha 

    0Reply
  • Brandi Graham
    Specialist · Dallas/Ft Worth TX · Member since 2019 · 37 posts · 36 votes
    7y

    @Bob Anderson tat makes sense! Great info!

    0Reply
  • Adam Scheetz
    Rental Property Investor · Staten Island, NY · Member since 2018 · 124 posts · 50 votes
    7y

    @Colleen Weaver I'm dealing with this in Augusta Georgia now. The public schools garbage and the magnet schools are incredible. As in a 1-3 rating if I'm lucky for public and an 8-9 rating for the Private and Magnet schools. But they're both in the same neighborhoods at times. But for me if I was aiming for small families to rent to than it would matter more. I going for equity, ROI, and cash flow.

    0Reply
  • Nick Ferrari
    Property Manager · Allentown, PA · Member since 2017 · 88 posts · 40 votes
    7y

    For the most part yeah it matters but there are some select areas where it doesn’t. Someone mentioned earlier that if it’s next to a college it doesn’t matter. That’s a great point.

    Another one is younger areas that are gentrifying, we have a few neighborhoods in philly where all the hipsters are moving too and they could care less about what schools are in the area and care more about how many bars and cafe’s are in the neighborhood.

    0Reply
  • Adam Scheetz
    Rental Property Investor · Staten Island, NY · Member since 2018 · 124 posts · 50 votes
    7y

    @Colleen Weaver I'm dealing with this in Augusta Georgia now. The public schools are garbage and the magnet schools are incredible. As in a 1-3 rating if I'm lucky for public and an 8-9 rating for the Private and Magnet schools. But they're both in the same neighborhoods at times. But for me if I was aiming for small families to rent to than it would matter more. I going for equity, ROI, and cash flow.

    0Reply
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