Top of the buy-to-let investment market

I've recently come across this investment deal being advertised by a national auctioneer house.

The block in leafy Kent is obviously a conversion property (not always the best - depending on the quality of the building work)  Often historic conversions were carried out to much lower levels of noise insulation, fire safety and non compliant electrical standards than modern standards would demand. The details on the website are:

Ten self-contained flats extending to a total of 777 sqm (8,358 sqft)

    •    All flats fully let subject to Assured Shorthold Tenancies
    •    Total Current income of £106,661 per annum
    •    Potential for further residential development subject to obtaining all necessary consents
    •    Potential to increase rent when tenancies come to an end

Value of investment

To me the asking price and investment multiple indicate that we must be close to the top of the market.  The asking price of over £1.8 million on the current rent gives a gross rental yield of less than 6%.  If the landlord then takes of the management cost and associated costs of the investment of say 2% you are left with a sub 4% net yield.  This implies the expectation of a massive increase in capital value either through development or growth in house prices.  I can't see it myself and given the lurking dangers that interest rates on any loan used to buy the property can only go upwards the upside on the investment is FULLY priced into the valuation.  At this price this and other similar investment properties are not a screaming buy and reflect the strong investment demand for buy-to-let properties rather than any long-term sensible investment criteria.

These are only my thoughts as a hard bitten investor and former surveyor.  I have been wrong before and I'm sure will continue to be proved wrong in the future.

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