How important is price per square foot when buying an investment property?

How important is price per square foot when buying an investment property?

A question we get asked frequently by our investors is how important is price per square foot when buying an investment property?

Income generated from buy to let investments are at a historical high. Rent offers an additional source of revenue and it’s one of the oldest and safest investment opportunities on offer.

There are several questions investors must ask themselves before they begin the investment process. What does the investment cost? How much will the investment return? One of the most important factors investors should be concerned with is its value.

Whilst price per square foot is easy to calculate, it isn’t the most accurate way of working out the properties true value. You can easily find the “average” price per-square-foot of an investment by adding the square foot cost of each unit that’s sold in a particular area then dividing that by the number of apartments sold.

Price per square foot can also vary based on location, condition, improvements, updates and many other factors. For example, if you’re working out price per square foot in an apartment in central Birmingham and are comparing it to a unit the same size in the next development over, you won’t get an accurate representation. One building unit might be high-spec, brand new and have used the best materials and the other building unit might be outdated and in need of repair. Whilst the two buildings share the same postcode and unit sizes, there are many other factors that stop the price per square foot being a like for like comparison.

How important is price per square foot when buying an investment property?

If you are relying on price per square foot in the investment process, you need to be aware of its limitations. Always question the accuracy of the data being presented and make sure you are comparing very similar properties. Looking at an average price per square foot for an area and then multiplying for the investment you are looking at is not the most reliable way to figure its true market value. Surveyors don’t rely on square foot costs, as the price per square foot just gives you average and does not precisely reflect the value in most cases.

The value of an investment is more accurately represented by the capital appreciation and yield that the property will generate rather than assessing the price per square foot. There will always be cheaper properties based on the square foot that may have been vacant for months, don’t generate a good yield and have a poor resale value, so it’s always worth looking at the investment overall rather than just the price per square foot.

Buy-to-let investment opportunities in the UK

If you’re on the lookout for a high yield property investment in Manchester, the UK’s buy-to-let hotspot, we have a number of high-spec apartments available for investment.

With cutting-edge low-carbon technologies and bespoke contemporary finishes, Beech Holdings’ prime location developments are in huge demand from both investors and tenants.

How important is price per square foot when buying an investment property?

We’re in the process of constructing several new residential developments. One of these buildings is located in the much sought-after Princess Street area. Our 115 Princess Street apartments are pre-let, fully managed and located in an area with high rental demand, giving you a guaranteed rental yield of 7% net for the first 2 years.

All of our developments are located in prime areas with high tenant demand, our 97% occupancy rate in 2019 is testament to this.

We only have a very small number of apartments available for investment at 115 Princess street, so if you’re interested in investing, or want to find out about any of our other developments, get in touch today.

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