Does It Still Pay To Be A Landlord?

Becoming a landlord used to feel like a sure-fire investment: you bought a property, placed a tenant in it, collected rent, and watched both the income and the value grow. Those straightforward days, however, have been challenged by a cocktail of higher costs, tougher regulation and shifting demand. So if you’re sitting on a buy-to-let (BTL) property or thinking of entering the market, you might be asking: does it still pay? Let’s look at the pros and cons in today’s climate.

The Case For Being A Landlord

There are still solid reasons why letting property remains a viable option. Let’s dive into it…

Strong rental demand: With home-ownership out of reach for many, especially younger people and those moving to London, the private rental sector remains busy. A strong demand tends to mean lower void periods and the potential for stable income. (NRLA)

Long-term capital growth: While property markets fluctuate, many areas still show value appreciation over time. Holding a property for the long-haul gives you the chance to benefit from that growth in addition to rental income. (hlcmortgages.co.uk)

Income diversification: For many landlords, property provides a complement to pension or savings income, especially if they already own the building outright or have low finance costs. (moneysupermarket.com)

Inflation hedge: Because rents and property values often move with inflation, letting real estate can act as a partial hedge in inflationary periods. (Centrick Invest)

So in short: yes, there are still rewards to being a landlord-but they require savvy and a long term mindset.

The Case Against: The headwinds are real

The flip side is that letting properties today comes with significantly more caution flags than a decade ago.

Higher costs and finance squeeze: Mortgage rates for buy-to-let have ticked upward in recent years and lending criteria have become stricter. That squeezes margins. (hlcmortgages.co.uk)

Tax and regulation changes: Several changes keep biting into returns. The mortgage interest tax relief changes, higher stamp duty surcharges on additional properties, and tightening of landlord regulations together reduce the “easy profit” model. (London Post)

Profit margins shrinking: Recent data highlights that many landlords are now earning relatively modest net returns-some earning under £10,000 annually after costs. (British Landlords Association)

Tightening tenant laws and risk: Proposed reforms (such as the Renters’ Rights Bill) suggest rights of tenants will increase, which could shift further risk to landlords. (Wikipedia)

More ‘active’ management required: Letting properties isn’t fully passive. Maintenance, tenant issues, compliance, regulation-all require time or money (if outsourcing). (moneysupermarket.com)

So, the upside remains, but the effort and risk are higher, and the margin for error is smaller.

How to decide if you should stay in or exit

If you own one or more rental properties-or are thinking about becoming a landlord-here are factors to check before you make your move:

• Do the numbers stack? Calculate realistic rental income, deduct finance costs, tax, maintenance, void periods, regulation costs-and see your net return.
• Are you in a strong location? Areas with high demand, good transport links and amenity pull are more likely to produce reliable rents and capital growth.
• Do you have margin for risk? If interest rates rise or regulation bites harder, can you absorb that? If your profit margin is tiny today, there may be little wiggle room.
• Are you prepared for the long term? Property tends to reward patience rather than quick wins. If you’re treating it as a short term cash cow, you may face disappointment.
• Are you complying with everything? Make sure you’re meeting the legal requirements for landlord responsibilities: safety, energy performance, deposit protection, rights of tenants. Non-compliance risks hefty penalties.

Exit strategy: Have a clear view of your exit: when, how much capital would you want/need, what the tax treatment on sale will be.

 What the future might bring

Looking ahead: there are signs that some costs and financing are easing (e.g., BTL mortgage rates showing some relief). And meanwhile, the supply of rental properties could reduce if many landlords exit-potentially pushing rents higher. However, that scenario also demands that landlords be even more robust in their financial planning.

So, does it still pay to be a landlord? The short answer: yes, but only if you’re realistic, well capitalised, located in a strong market and willing to play the long game. The “easy profits” era is largely over. What remains is an opportunity-but one that demands strategy, discipline and risk awareness. At Davies & Davies, we guide landlords and investors through the ups-and-downs of today’s market: feasibility studies, location advice, rental projections, compliance checks. If you’re unsure whether your portfolio still stacks up, or whether you should enter or exit the market, give our team a call. We’ll talk through the numbers, your position and what the direction ahead looks like.

Contact us:

mark@daviesdavies.co.uk – Sales Director (contact for sales, lettings and new homes)

katrina@daviesdavies.co.uk – Director of Property & Block Management (contact for property and block management)

Davies & Davies Estate Agents, 85 Stroud Green Road, London, N4 3EG

Article & images by Barefaced Studios

You might also want to read other useful blog articles by clicking here.

Please note that all content contained within our website is for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice. All Content on this site is information of a general nature and does not address the circumstances of any particular individual or entity. We advise seeking professional advice from a legal, financial, or other professional.