As I am sure you are aware, one of the best things about my job as an agent is helping Thanet landlords with their strategic portfolio management. Gone are the days of making money by buying an old Thanet 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 Thanet property market has gone in the last 11 years, science must also play its part on the 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 it 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 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 and the size of accommodation (bigger and more rooms equalling more money) and where they live (location) vs making ends meet.
Interestingly, I know there are a lot of you in Thanet who like to see my statistics on the Thanet 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 Ramsgate for example, the current average figures are being achieved (and I must stress, these are average figures, so there will be an enormous range), but on average, properties in Ramsgate, split down by type are achieving…
- Ramsgate Detached Property – £265 / sq ft
- Ramsgate Semi Detached Property – £242 / sq ft
- Ramsgate Terraced Property – £224 / sq ft
- Ramsgate Apartments – £232 / sq ft
So, the rental figures; 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 Ramsgate area is 745.1 sq ft (interesting when compared to the national average of 792.1 sq ft).
This means the average rent per square foot currently being achieved on a Ramsgate rental property is £11.56 per sq ft per annum
So, what can we deduce from this? Well the devil is always in the 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 Thanet 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… what really happens is a doubling of size gives only an approximately 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% 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.