So! What does that mean? Well, it’s actually very interesting…
As I am sure you are aware, one the best things about my job as an agent is helping Burton landlords with their strategic portfolio management. Gone are the days of making money by buying any old Burton property to rent out or sell on. Nowadays, property investment is both an art and science. The art is your gut reaction to a property, but with the power of the internet and the way the local property market has gone in the last 11 years, science must also play its part on a property’s future viability for investment.
Many metrics most property professionals (including myself) use when deciding the viability of a rental property is what properties are selling for, the average rent, the yield and an average value per square foot.
However, another metric I like to use is the average rent per square foot. The reason being is that is a great way to judge a property from the point of view of the tenant … what space they get for their money. Now of course, location, location, location has a huge influencing factor when it comes to rents and hence rent per square foot. Like people buying a property, tenants also have that balancing act between better/worse location, more vs. less money. Also, size of accommodation with bigger and more rooms equalling more money and where they live vs. making ends meet.
Interestingly, I know there are a lot of you in Burton who like to see my statistics on the property market, so before I talk about the rental figures per square foot, I wanted to share the £ per square foot on the values.
In Burton, the current AVERAGE figures are being achieved – and I must stress, these are average figures, so there will an enormous range in these figures – but on average, properties in Burton, split down by type are achieving …
How does that compare to nearby Derby?
The extent of space you get for your rent is replicated in the space you get for your money when buying a property. The average size of rental property in the Burton area is 844.1 sq ft
Compare that to the national average of 792.1 sq ft and to neighbouring Derby at 787.9 sq ft
This means the average rent per square foot currently being achieved on a Burton rental property is £7.19 per sq ft per annum – in Derby it’s £9.10 per sq ft per annum.
Well the devil is always in detail! Whilst I was able to quote the average overall figure and the fact my research showed it was quite clear from data that there is relationship between the average £ per sq ft figures on property values and average £ per sq ft on rental figures as a property grows in size.
However, something quite intriguing happens to those figures, in terms of what the property will sell for and what it will rent for, when we change and increase the size of the property.
My research showed that doubling the size of any Burton property doesn’t mean you will double the value of it… in either value or rent. This is because the marginal value increases diminish as the size of the property increases. In layman’s terms… subject to a few assumptions, double the size of the house doesn’t mean double the value… it actually equates to an approximate 40% to 65% uplift in value, but here comes the even more fascinating part… when it came to the rental figures, double the size of the house meant only a 20% to 45% in increase in rent.
In a future article, I will be discussing the actual added value an extension can bring … but in the meantime, in an overall and sweeping statement, most of the time it makes sense to extend if you are going to live in the property as long as the extension is proportionate to the property, but if you are going to rent it out … possibly not!