More than half of the UK's private landlords (51%) report gross incomes of less than £10,000 every year - and that puts them in a critical position as regulatory pressures intensify, Savills says.
The real estate firm has analysed HMRC data from 2022-23 and found that of the 2.84 million individuals declaring property income, they are facing a stark choice: do they hold onto their investments or sell amid a challenging environment?
On average, landlords reported a gross income of £17,665, yielding a profit of £9,021 after deducting £2,799 in finance costs.
However, where debt is higher, landlord profits shrink to around £5,700, underscoring the financial strain being felt by smaller landlords.
Do landlords hold or sell?
The firm's head of residential research, Lucian Cook, said: "For those operating in this bracket, the decision about what to do next is mostly binary: hold or, increasingly, sell.
"Only the bravest are likely to expand in the current environment."
He added: "Perhaps surprisingly, less than 5% of private individual landlords report a gross income of over £50,000.
"While at this end of the scale, landlords are more likely to have incorporated the lettings business, they still receive around one-third of the gross property income received by private individuals."
He points out that for these landlords, the ability to restructure their portfolio to future-proof it, or build it up, is restricted because of so many landlords leaving the PRS.
BTL is still lucrative
Savills says that the buy to let market remains lucrative overall, with private landlords generating £25.6 billion in profit from £50.2 billion in turnover during 2022-23.
The English Private Landlord Survey also reveals that 45% of landlords own just one property, and 37% hold two to four.
Those figures, Savills warns, also make the regulatory burden particularly heavy for smaller landlords.
The PRS, the survey reveals, consists of 5.57 million homes in the PRS worth £1.58 trillion.
Why landlords invest
The research also shows that motivations for entering the market vary, with 37% of landlords initially buying a property for personal use before renting it out.
Another 5-6% inherited or were gifted properties, and 16% became landlords for non-financial reasons.
Despite these diverse entry points, only 4.9% view their investments as temporary.
The Renters' Rights Bill, the most significant regulatory change in 30 years, is already reshaping the landscape.
UK Finance data shows 35% of private rented homes have a buy to let mortgage, and 42% of landlords offset finance costs, leaving most debt-free.
It says the average mortgaged landlord now holds five properties, up from 3.5 in 2019, with yields rising from 6% to 7%.
Some landlords are expanding
Mr Cook said: "Recent stamp duty data shows that in the six months to the end of March, almost 111,000 purchases across England and Northern Ireland paid the recently elevated surcharge for additional homes.
"That is similar to the average levels of activity seen in the preceding five years.
"The main beneficiary has been the Treasury, for whom the revised surcharge level has raised just shy of £1.4 billion in the six months to the end of March."
He adds: "This indicates that there remains a core of committed residential landlords on whom tenants are going to become increasingly reliant, as others review their continued investment in the sector."
Student landlords need to plan
The managing director of Accommodation for Students, Simon Thompson, said: "For student landlords, particularly those among the 51% earning less than £10,000, the PRS presents both opportunity and challenge.
"They still need to offer quality homes but the prospect of what the Renters' Rights Bill brings with periodic tenancies and tighter rules needs careful consideration.”
He added: "The new law and low levels of profitability will mean there are student landlords who love what they do but are questioning whether they should continue.
"That's such a sad loss for the sector and the students who want somewhere nice to live for their studies."
