More than eight in ten landlords are making a profit from their lettings, with 17% making significant returns, despite rising operating costs, mortgage expenses and regulatory pressures.
The claim follows ModaMortgages’ analysis of new research from Pegasus Insight’s latest Landlord Trends Q3 report. It found that 85% say their lettings activity is profitable. Only 4% say they are making a loss and 11% are breaking even.
The report shows that average gross rental yields remain unchanged at 6.4%, maintaining the levels recorded over recent quarters.
It also shows that profitability has remained consistent over time, with the proportion of landlords reporting a profit generally remaining above 80% since the beginning of 2020, apart from a period of pressure following the initial increases in mortgage rates during 2023.
Those landlords without mortgage borrowing are most likely to be making a profit at 93% for those who own their portfolios outright. That compares to 79% of those with buy-to-let borrowing.
Maintenance, upkeep and repairs represent the largest category of expenditure for both houses in multiple occupation (HMOs) and other rental properties.
The report estimates 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.
Becki Fraser-Tucker, head of sales at Moda Mortgages, said: “Landlords have had plenty thrown at them over the last few years. 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.”
This article is taken from Landlord Today