Scholastic Capital Update #19 | January 2025

Scholastic Capital is an evergreen real estate fund that buys single family homes in elite school districts. We then rent those homes on long term leases to highly qualified tenants interested in being there for the school district.

We do this on behalf of our investors looking for a “high floor, bond-like” real estate fund. Our investors, and new investors who may join us, are typically interested in our monthly cashflow distributions, equity appreciation, and depreciation tax benefits.

As always, italic text below is explanation of datapoints and normal text is our commentary

Hello Friends of Scholastic Capital,

As long time followers of this newsletter likely know, we firmly believe in transparency and data sharing at Scholastic.

For this reason, investors received a more detailed version of the below email last week.

Now, we can share a slightly edited and redacted email more publicly with our friends.

Key Data

Overview Data

• Homes Owned: 21

• Occupancy Rate: 100%

• Average Rent: $3,403

• Zip Code Market Share: redacted for investors only

Zip code market share is a measure of our impact on local market pricing. It’s calculated by dividing the number of our homes rented in a zip code in the past 12 months by the number of total homes rented in that zip code in the last 12 months.

Tenant Data

• Average Lease Length Remaining: 16.5 months

• Average Tenant Salary: $226,400

This metric shows us how comfortably our tenants can afford their rent. The higher their income is, the less likely Scholastic is to experience any issues of non-payment. A higher tenant income means we can charge a higher rent as well.

Maintenance Data

• Cost to repair per home per month: $323.50

This datapoint shows how much we spend monthly per home on maintenance. This is extremely useful for forecasting and budgeting. Even if a home has $0 in maintenance spend in a particular month, we can escrow this amount for the inevitable maintenance expense

Home Valuations

• Average Purchase Price Per Home: $480,548

• Current Average Home Value: $535,328

The current home valuation changes quarterly when our fund administration accounting firm re-values all of the homes. We are not involved in setting valuation and solely rely on third party values.

Debt Data

• Current Average Mortgage Balance Per Home: $319,248

• Portfolio Loan-to-Value (LTV): 59%

• Current Average Weighted Interest Rate: 6.15%

Investor Data

• Opt-in rate to DRIP: redacted for investors only

• Newsletter growth rate: +8 readers this week

Historically, roughly 75% of our investors read this newsletter first to get to know Scholastic and how we think. As new readers grow, the number of investors in the Scholastic family likely grows as well.

Distributions

Distributions were just sent out and are higher this month than last. The biggest driver here between last month and this month has been maintenance, as we only had one maintenance call across the past 30 days.

That is well below expectation and forecast. Our expectation is we’ll see more maintenance calls next month in a “reversion to the mean.”

However, this will be the most interesting datapoint over the next several months. The reason why is we are now in a “Steady State” because tenants have been in their homes for a while and have had plenty of time to find any issues in houses.

Theoretically, any nagging/lingering issues have been addressed at this point and new maintenance requests will come from net-new broken items.

We’re curious to see how maintenance call activity changes as a result.

Outside of maintenance, we have limited new changes to report on day to day operating of the homes. Operations have been continuing on plan and as expected

Equity & Fund Performance

A third party accounting firm works with us as fund administrator to set NAV, which stands for net asset value. They are ultimate arbiters of determining the value of portfolio and how that value passes back to investors.

They have finalized their Q4 values and Scholastic Capital is up 8.35862% since our initial launch on 4/25/24.

Our distributions are approximately 5%, not counting tax benefits that investors may receive. For that reason, we believe we are roughly tracking towards an Year 1 return of ~13% for our investors.

What we got done this months

This month has been focused on several discrete items.

Operations & Margin

First, we are working on improving operations and fighting for margin. We briefly mentioned it in our public facing newsletter, but we have multiple opportunities available to improve margin.

For example, there are insurance players that specialize in single family rental funds. Last year, we were too small for them and not of interest. Today, the portfolio is now large enough to be interesting to these partners.

As an illustration, our annual property insurance bill is $52,000. We now have options on the table that is only $29,000 for the year.

We have a few other opportunities here that we are chasing down. Most notably is a dramatic decrease in title/closing costs as we can now work with an SFR specific title company. We anticipate the closing cost savings to potentially total over $1M over the life of the fund.

Fundraising

We are preparing to begin fundraising again for the upcoming 2025 summer acquisition window.

More to come on this later

Press

Redacted for investors only

Get to know us

As always, we love getting to meet more folks interested in niche real estate thesis.

For that reason, we have an open Calendly link with 15minute slots.

If you’d like to chat niche thesis like Scholastic, real estate, or even joining us as an investor, feel free to grab time HERE.