Real Estate Investing

How Your Property's School District Affects Rental Pricing

Written By

Belong on Jun 9, 2022

Mother walks her young son to school, carrying backpack. Walking in a desirable rental neighborhood with a great school district.

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Rental property owners can expect that home values will be higher in areas where school districts are favorably rated. As a result, high-quality schools have the potential to influence the way you price your rental. However, homeowners must understand how schools are evaluated and why these factors influence rental pricing. 

How school districts influence property values 

When high-quality schools attract homeowners and residents to a specific area, the value of those properties increases. An increase in home values (and the subsequent increased price for rental homes) is more likely to occur in areas where good schools and homes are in short supply. 

When it’s easier to develop new homes, it's less likely that home values and rent prices will increase because you can reduce the demand as new homes are built. In contrast, in areas where it’s impossible to reduce demand by building new homes, the value of homes and the cost to rent homes will continue to increase. 

Understanding how we evaluate school districts 

In evaluating your property school district, it’s essential to consider the quality of the school district overall, but remember that elementary schools, middle schools, and high schools can vary significantly in the same neighborhood or district.

Several factors can affect school district ratings, including: 

  • Standardized test scores
  • Classroom sizes
  • Student-teacher ratios

How to research individual schools and school districts 

Search for online school profiles and rating sites 

Several websites publish ratings and evaluations for individual schools and their districts:

Keep in mind that these sites evaluate schools based on their own unique criteria or by compiling data from other sources. Ideally, you should compare ratings from multiple sources to validate their data and claims.

Locate and review any state dashboards or reports

Often, each state will compile a website page where residents can compare school districts and individual schools. These dashboards can serve as a starting point for researching your property’s school district. These often include test scores and metrics like student-teacher ratios like other third-party reports. 

However, you should also search for upcoming changes or improvements planned for districts and individual schools. Schools that undergo improvements or renovation projects will likely improve their test scores in the following years. As a result, capital improvement projects can be a good indicator of improving school district performance. 

Factors that affect rental home desirability for parents 

Parents invested in finding a rental home in a good school district will likely look beyond rating and test scores. Several factors will contribute to a “good” location for high-quality education choices. 

Proximity to public school alternatives 

Parents may choose to look beyond public school education opportunities to find the ideal location to rent a home. Parents may look for a home within driving distance of a charter or private school. Parents may also look for magnet schools or special academic programs within local public schools. 

If there are nearby public schools alternatives, it might be helpful to understand how student admission works. For example, private schools may require students to interview and pass specific tests before enrolling. Alternatively, charter schools may have long waiting lists or lotteries. 

How parents can choose their child’s school

If you’re not already familiar with the school section process in your district, it may be helpful to research the process. Each state and district has different guidelines which govern which school parents can send their children to. 

In some school districts, parents may choose any school in the district and not just the school closest to their home. Other guidelines might require students to participate in a lottery system. In other districts, students may only have one choice of public school.  

How do medium and low-ranking school districts affect the rental price of a property 

If you find that your property’s school district ranks average or below, your rental pricing may not be affected. The vast majority of school districts in the country perform at a moderate level, with others ranking higher and lower. 

It is important to note that poorly performing school districts can correlate with other factors that could affect the rental price of your property. It’s often the case that communities with underperforming school districts experience more crime and enjoy fewer amenities like parks and recreational spaces. So while a low-ranking school district may not directly affect rental pricing, it’s crucial to evaluate school districts within the context of their communities. 

How highly desirable school districts affect property rental prices 

In contrast, if your property’s school district ranks well and is highly desirable, you may see that your rental pricing is affected positively. Why might that be, and what effects can school districts have on rental properties? 

More demand for homes

There will be more demand for rental homes if fewer homes are for sale in your highly-desired school district. This is particularly true for areas with limited opportunities to build new homes or residential buildings. This increased demand will result in higher rental values and more cash flow. 

Residents are invested in the community and schools

In areas where schools are highly desirable, and there is more demand for homes, residents are more likely to renew their leases and see more value in their current rental homes. With a focus on school performance, you will likely see that residents are more invested in their communities.  

Often there is a correlation between student performance and parental involvement. If a parent is able to emphasize their children’s academic performance, they’re also likely to have the means to take good care of their rental property.

How highly rated school districts can affect home value 

High demand for rental homes in an area where the market cannot grow or reduce demand often means that homeowners will invest more money for a smaller, older, or less updated house. Buyers and renters may be willing to forgo some features, like a large yard, in exchange for access and proximity to good schools. 

The effect of school districts on home value over time

The National Bureau of Economic Research found that home values increased by twenty dollars for every dollar spent on public schools in a community. Investing in public school education has an evident positive influence on home values over time. High-quality schools can help ensure home values grow or remain stable in changing markets. A home located in a desirable school district can protect homeowners against market volatility. 

Understanding the relationship between property taxes and good school districts 

What’s the correlation between property taxes and school districts? In communities where school districts perform well and are highly desired, education-related ballot measures are often unanimously passed, resulting in higher property taxes for homeowners. The more tax revenue a school gets to pay for teachers, books, and infrastructure, the better the schools usually end up being. As a result, property values and rental prices increase. 

Will my property’s school district affect rental pricing?

To understand if your property’s school district will directly affect your rental pricing, you need to look at the overall context. 

Understand that schools are just one factor for residents 

Most school districts will fall somewhere in the middle. These schools may not be exceptional, but they are not terrible. Compare your school district to others in the area, rather than against school districts across the country. For every real estate market and school district, residents are impacted differently. 

Not all residents or tenants will care about the school districts. Parents motivated by education will have to weigh schools against several other characteristics. It’s unlikely that schools will be their only deciding factor. 

How can you tell if the school district matters? 

Ultimately, you can't know how much your property’s school district matters. However, you can appropriately price your rental property and evaluate the cash flow or asset preservation it provides. 

Remember that residents communicate the value of living in a particular home based on how much they are willing to pay, and this includes the value they assign to the quality of the school district. 

How to maximize the rental pricing of your home

Belong can help homeowners evaluate and price their rental homes accordingly. We accurately identify the right rental price for each home, including an evaluation of school districts. 

Belong’s rental home pricing assessment also evaluates current trends, the current real estate market, real-time property values, local charms, and the particular features of each home. To maximize your rental price, we use technology to your advantage by looking at potential residents' real-time interest in your home.

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