Buy-to-let profits remain intact for most landlords despite rising operating costs, mortgage expenses and regulatory pressures, according to specialist lender Moda Mortgages’ analysis of new research from Pegasus Insight.
The latest Landlord Trends report found that 85% of landlords make a profit from their lettings activity, including 17% who describe their returns as a large profit. Just 4% report a loss, while 11% break even. Average gross rental yields held at 6.4%, in line with recent quarters.
Buy-to-let profits have stayed consistent over time. Since the start of 2020, the proportion of landlords reporting a profit has generally remained above 80%, apart from a period of pressure after the first mortgage rate rises in 2023.
The latest findings, however, show a considerable gap between landlords who remain profitable and those achieving the returns they enjoyed previously.
Financing and costs shape buy-to-let profits
Financing costs divide the results. Among landlords who own their portfolios outright, 93% report a profit, compared with 79% of those with buy-to-let borrowing.
Maintenance, upkeep and repairs form the largest category of expenditure for both houses in multiple occupation (HMOs) and other rental properties. Average annual operating expenditure is £17,665 for non-HMO portfolios and £28,168 for HMO portfolios, with maintenance and repairs accounting for 39% and 27% respectively.
“Landlords have had plenty thrown at them over the last few years,” said Becki Fraser-Tucker, head of sales at Moda Mortgages (pictured).
“Mortgage costs have risen, maintenance bills have increased and the regulatory burden has continued to grow. So, against that backdrop, the fact that 85% are still turning a profit is a powerful indication of just how resilient the buy to let market remains.
“Of course, making a profit and achieving the returns enjoyed a few years ago are two different things. For many landlords today, it’s about working a little harder to protect their margins, keeping a close eye on costs and making sure their finance is still working as effectively as it can for their portfolio and longer-term plans.
“It’s encouraging to see rental yields holding relatively steady, but yield is only one part of the picture. Mortgage payments, maintenance, insurance and the everyday costs of running a property all have to come into the equation.
“What these figures show, though, is that buy to let is far from having lost its appeal. Well-run portfolios are still generating positive returns and there are still opportunities out there. In a more demanding market, having the right mortgage solution and good professional advice behind you can make a real difference.”
