The latest analysis of the private rental market shows that only 85% of landlords continue to report their lettings activity as profitable.

This is down from 89% on the preceding quarter. 

There was a 2% uptick in the proportion reporting a financial loss in Q4 2025 while average achieved rental yields edged down from 6.6% to 6.4%.

Performance across the sector is becoming increasingly uneven says Pegasus Insight, which conducted the analysis. 

Landlords operating Houses in Multiple Occupation (HMOs) continue to outperform the wider market.

They are typically achieving materially higher average yields of 7.3%, helping to offset slightly higher running costs and management complexity. 

By contrast, landlords with standard property portfolios are more exposed as costs remain elevated.

Mark Long, managing director and founder of Pegasus Insight, comments: “The key takeaway from Q4 is not that profitability has weakened significantly, but that it is becoming more uneven. 

“Overall returns remain close to recent highs, but the margin for error is narrowing for a growing proportion of landlords.

“We’re seeing a clearer separation between business models. Higher-yielding, more intensively managed portfolios, particularly HMOs, continue to provide a degree of insulation, while more traditional portfolios have less flexibility as costs and complexity remain challenging.

“The risk to buy-to-let landlords is not a sudden deterioration in performance, but a more gradual erosion of resilience. 

“In an environment where yields are no longer rising, the ability to absorb further regulatory, operational or economic pressures will increasingly depend on the strength of landlords’ financial structures and the scale and mix of their property portfolios.”