PropLens · George Johnston House, 61 Bank Street, Lochgelly KY5 9QN

Offer range · Operational reposition

£40k

£55k

Lower end · 20% Upper end · 15%

Auction guide £160k sits 191% above the upper end (£55k). Opening bid £145k sits 164% above the upper end. The range reflects office-hold economics; HMO conversion does not pencil at conventional finance (see Strategy section).

Income basis ERV from Kirkcaldy/Dunfermline office proxies, condition-adjusted (Fair × 0.85), stabilised at 90% effective occupancy and 85% running cost retention. Vendor income claims unverified and not used.

£12,366 − £1,855 → NOI £10,500

Offer explorer

Your offer

£55,000

Equity required

£0

Lender lends £35,750 against VP £55,000

Cash-on-cash

DSCR @ 8%

3.67×

Same at any price

Net cash flow

£7,640

NOI − debt service (fixed)

Lender lens · five ratios

DSCR @ 8% rate 3.67× Strong

Stress DSCR @ 10% rate 2.94× Strong

Debt Yield (NOI / Loan) 29.4% Strong

Yield on Cost 0% Viable

Net Initial Yield 0% Viable

65% LTV · 8% IO · 7% costs · NOI £10,500 · VP £55,000 (lender basis)

Thesis

Two-storey town-centre office building of 2,290 sqft NIA, configured as 15 suites with shared facilities and partial current occupancy. Marketed by Prime Property Auctions at a £160,000 auction guide (opening bid £145,000) and by G&S Properties at £195,000 Offers Over. The vendor frames two paths: continued hold as serviced office (vendor-claimed potential £40–50k pa fully let) and HMO conversion (vendor-claimed 16 rooms generating £77k pa).

The income lens produces a range of £40k to £55k: a stabilised office-hold model anchored on PropLens-estimated ERV at £6/sqft (Kirkcaldy proxy benchmark, condition-adjusted), not on vendor marketing figures. The HMO conversion lens does not pencil at conventional finance: the £320k commercial-to-residential conversion cost (£140/sqft including rural premium) exceeds the stabilised value the resulting building can support, even on stress-case room economics. Lochgelly's HMO market is structurally thin (1 active SpareRoom listing town-wide as of February 2026), with Dunfermline used as the comparable benchmark for room rents at £350–450 pcm.

The asking price sits materially above the methodology range for either lens. The structure of the deal (auction sale, two competing agents at different price points, partial current vacancy, unverified vendor income figures) suggests the operative path is auction bidding discipline anchored on the office-hold lens, not the vendor's HMO narrative.

What's wrong with it

Partial current vacancy with no disclosed rent roll: vendor's £40–50k office income figure is forward-looking, not actual.
Vendor's £77k HMO income claim (16 rooms × £400 pcm) is approximately 4x current SpareRoom evidence for Lochgelly (one active listing town-wide).
Auction format compresses due diligence: legal pack, EPC, rateable value, planning history, and Fife Council HMO licensing position all require pre-auction verification.

What's right with it

Building is already cellular (15 suites): refurb-to-let scope on vacant portions is cosmetic-only at £25/sqft, not full subdivision.
Town centre frontage with private parking and one-minute walk to Lochgelly Station (Edinburgh line) supports both office and residential occupier profiles.
Asking entry of £70/sqft sits below the Kirkcaldy commercial CV benchmark (£83–100/sqft) and well below Dunfermline (£130–163/sqft); pricing reflects tertiary location, condition uncertainty, and demand softness rather than mispricing.

Risks

Office demand softness already visible in current partial vacancy; lease-up to stabilised 90% occupancy could take 12+ months.
HMO room demand in Lochgelly is unproven: with one comparable SpareRoom listing town-wide, achieved room rents and absorption rate are speculative.
Two competing agents at materially different price points (£160k auction guide vs £195k Offers Over) signal vendor expectation uncertainty and possible competition dynamics on auction day.

DD gaps

Current rent roll, tenancy schedule, and service charge accounts for the occupied suites: vendor's income claims need verification against actual receipts.
Fife Council HMO licensing position for any conversion: number of rooms permitted, minimum room sizes (Scottish HMO standard 8.4 sqm sleeping room), Article 4 equivalents, and any overprovision policy.
Building condition report, EPC, rateable value, electrical/fire/legionella compliance, asbestos register: standard surveys for a 1960s/1970s-era stone office building.

Considerations

Property is being sold by online auction: 28-day completion and non-refundable deposit. Suits cash buyers or pre-arranged bridging only.
HMO conversion in Scotland requires full planning permission (no Class MA equivalent): 12–16 week minimum timeline before licensing route even begins.
Population base of approximately 6,000 places Lochgelly below the standard HMO viability threshold of 15,000–30,000; commuter access to Edinburgh (35 minutes) is the offsetting demand driver.

Property & Valuation

Facts, condition, comparables, valuation stack, and purchase-cost schedule for due-diligence reference.

Facts

Address	George Johnston House, 61 Bank Street, Lochgelly KY5 9QN
Postcode area	KY5 (Fife Council, Scotland)
Asking	£160,000 auction guide (£145,000 opening bid). G&S asking £195,000 Offers Over.
Property type	Office building, 15 suites with shared facilities. Two-storey stone/brick. Class 4 (Business).
Size	2,290 sqft (treated as NIA; vendor unlabelled. Cross-check on building survey advised.)
Tenure	Not disclosed in listing. Verify pre-auction.
Vendor agents	Prime Property Auctions (auction), G&S Properties (private)
£/sqft asking	£70/sqft on auction guide
Lease status	Partial vacancy. Rent roll not disclosed. Vendor claims office potential £40–50k pa; HMO potential £77k pa. Both unverified.
Parking	Private parking to side and rear
Transport	1 minute walk to Lochgelly Station (Edinburgh-Fife line)
Missing data	Tenancy schedule, EPC, RV, service charge accounts, brochure, floor plan, building survey

Photos

Physical assessment

Two-storey stone and brick building with town-centre frontage on Bank Street. Visible signage indicates business centre use. Standard secondary commercial appearance from external photo.
Interior configuration: 15 office suites with shared facilities (toilets, kitchen, common circulation). Already cellular; subdivision has been done historically.
Private parking to side and rear: a competitive advantage in a town-centre location.
One-minute walk to Lochgelly Station: rail link to Edinburgh (35 minutes), Kirkcaldy (10 minutes), Dunfermline (15 minutes).
No "refurbished" or "needs renovation" language in listing text: condition rated Fair (default). Photos and physical inspection required to confirm.
Surrounding streetscape: town centre of small Fife town (population approximately 6,000). Lochgelly itself shows characteristics of the wider Fife coalfield post-industrial regeneration profile.

Per-unit income

No verified rent roll available. Income basis: ERV from comparables (Kirkcaldy/Dunfermline office-rate proxies), condition-adjusted to Fair (×0.85), then stabilised at 90% effective occupancy and 85% running cost retention.

Component	Value
NIA	2,290 sqft
£/sqft base (Kirkcaldy proxy, blended)	£7.00
Condition adjustment (Fair × 0.85)	£5.95
£/sqft adjusted (rounded)	£6.00
Gross ERV (fully let)	£13,740
Effective gross (× 90% stabilised)	£12,366
Less running costs (15%)	(£1,855)
Stabilised NOI	£10,500 (rounded)

Vendor's claimed £40–50k office potential implies £17–22/sqft, which is Dunfermline territory (£13.79/sqft Edozo median for mid-size) and unrealistic for Lochgelly. Year 1 effective cash-on-cash will be lower depending on lease-up speed.

Yield selection

Lochgelly is not separately listed in PropLens yield benchmark tables. The closest Fife proxies are Kirkcaldy (KY1) and Dunfermline (KY11/KY12). Lochgelly is structurally weaker than both: tertiary tier with population approximately 6,000 versus Kirkcaldy 49,000 and Dunfermline 55,000.

Step	Value
Base ARY ("Other small towns" secondary midpoint)	15.50%
Sub-£500k lot size premium	+175 bps
Selected ARY (office hold)	17.25%
Term yield (ARY − 75 bps; not used as building is effectively vacant)	16.50%
HMO ARY (small Fife town HMO 13% + 175 bps lot premium)	14.75%

Sensitivity at office NOI £10,500: at 15%, value £70,000 (+30%); at 17.25%, value £61,000 (selected, before void/RF deductions); at 20%, value £52,500 (−14%). Yield uncertainty is material at this tier.

Valuation stack

Basis	Value	Working
VP (MV3)	£55,000	£79,650 rack rent less £13,740 void (12mo) less £6,870 rent-free (6mo, Fair) less £1,374 reletting less £4,200 holding costs
Rack Rent (gross ceiling)	£80,000	£13,740 ERV / 17.25%
T&R	Not applicable	No verified term income; treated as effectively vacant
MV1 stabilised (office hold)	£60,900	£10,500 NOI / 17.25%
MV1 stabilised (HMO stress-case)	£170,000	£25,000 NOI / 14.75% (12 rooms × £350 × 12 less 25% void less 35% other costs)
90-day restricted (office)	£48,700	MV1 × 0.80
180-day restricted (office)	£54,800	MV1 × 0.90
Asking (auction guide)	£160,000	£70/sqft on stated NIA

Acquisition benchmark

Lochgelly is not in the benchmark table. Kirkcaldy is the closest Fife proxy with conventional office CV £83–100/sqft (Novaloca March 2026 rate £10/sqft / 10–12% yield range). Dunfermline CV £130–163/sqft is the stronger Fife reference (£13/sqft / 8–10% yield).

Asking £70/sqft (£160k auction guide) sits below both proxies. The discount reflects Lochgelly's tertiary position, partial vacancy, and condition uncertainty rather than a clear pricing edge: in tertiary Scottish locations, "cheap on a per-sqft basis" frequently signals thin buyer demand rather than mispricing.

Cross-reference Edozo office rate benchmarks (FYE 2026-03): Kirkcaldy small office £11.16/sqft (HIGH confidence on 2 small comparables, LOW on mid-size 2 comparables at £4.02/sqft); Dunfermline small office £17.67/sqft (HIGH, 11 small comparables). Source attribution: PropLens market research using Kirkcaldy as the primary Lochgelly proxy.

Purchase costs

Calculated at upper end £55,000 purchase. Scotland: LBTT applies.

LBTT (Scotland, non-residential, ≤£150k = 0%)	£0
Legal fees	£4,500
Disbursements	£650
Broker fee (1%)	£550
Lender arrangement (2% of 65% LTV loan)	£715
Lender legal	£2,500
Surveys / DD	£2,000
Refurb to let (~50% vacant suites × £25/sqft)	£30,000
Total purchase costs + refurb	£40,915

Strategy & Appraisal

Value-add angles, holding-structure recommendation, and supporting analyses for the bid thesis.

Value-add angles

1. Operational reposition: stabilise as serviced office (Strong)

The building is already cellular with 15 suites. Partial occupancy can be stabilised to 90% through active marketing and refresh of vacant suites at £25/sqft cosmetic refurb. Stabilised NOI £10,500 supports a VP-anchored range of £40k – £55k. Key risk: Lochgelly office demand is structurally thin; lease-up to 90% may take 12+ months and require below-market rents to fill rooms. The vendor's £40–50k pa fully-let claim implies rents 3x the Kirkcaldy proxy benchmark and is not assumed.

2. HMO conversion (Weak)

Vendor markets the building as suitable for 16-room HMO conversion at £77k pa gross. Stress-tested at 12 rooms × £350 × 12 with 25% void and 35% running costs produces stabilised NOI £25,000. Conversion cost £320,000 (2,290 sqft × £125/sqft commercial-to-resi × 1.12 rural premium). The stabilised value (£170k at 14.75% HMO yield) is materially less than the conversion spend, producing a negative residual at conventional finance. SpareRoom February 2026 shows one active Lochgelly room listing town-wide: demand evidence is structurally thin. Dunfermline (10mi NE) used as proxy room-rent benchmark at £350–450 pcm with attribution. Planning risk: Medium-High in Scotland (full planning required, no Class MA equivalent; Fife Council HMO licensing).

3. Residential flat conversion (Not viable)

Lochgelly residential flat values are £60–80k (comparable streets: Paul Street, Mina Crescent, Garry Park). At 2,290 sqft producing approximately 3 flats of 750 sqft each, gross GDV is £180–240k against £320k conversion cost. Office-to-flats conversion does not pencil and is not the recommended exit. Excluded from headline range.

4. SSAS hold (Moderate, office-only)

Class 4 office is SSAS-eligible. At 50% LTV the SSAS-funded range is £35k – £50k, lower than leveraged purchase because less borrowing requires more equity. Tax-free rental income within the pension wrapper. Annual SSAS administration costs of £2,000–5,000 erode the benefit on a sub-£100k purchase. SSAS retention is incompatible with HMO conversion.

5. Vendor finance / lease purchase (Speculative)

Auction format makes vendor finance unlikely (28-day completion). Lease purchase incompatible with auction. Could be relevant only if the property fails to sell at auction and reverts to private treaty via G&S, at which point the £195k Offers Over framing creates room for a deferred-consideration structure tied to lease-up performance.

Holding structure

The matched holding structure depends on the chosen angle. For operational reposition as serviced office, a Company (SPV) or SSAS is appropriate: Class 4 office is SSAS-eligible and produces 0% tax on rental income and gains, at the cost of 50% LTV and SSAS administration overhead.

HMO conversion would require holding in a Company (SPV) for taxation and licensing flexibility, but the underlying economics do not support the conversion at conventional finance. SSAS is incompatible with HMO conversion (residential use is SSAS-ineligible).

Sources

Prime Property Auctions listing: primepropertyauctions.co.uk (61 Bank Street)
G&S Properties listing: George Johnston House, £195,000 Offers Over (cross-portal)
Ryden 90th Scottish Property Review 2025 (yield benchmarks)
Knight Frank Scotland Report 2025
Revenue Scotland: LBTT non-residential rates
Edozo Insight office lease comparables (Kirkcaldy, Dunfermline; FYE 2026-03)
SpareRoom.co.uk: Lochgelly room listings (snapshot February 2026)
Fife Council Local Development Plan and HMO licensing policy

Jurisdiction

Scotland (Fife Council, KY5 postcode area)