The average landlord is now carrying £714,000 in borrowing and paying around £25,000 a year in interest alone, before tax, maintenance or compliance costs are taken into account, according to new analysis from Pepper Money and Pegasus Insights.

It claims that while 8 in 10 landlords remain profitable, rising costs, tighter taxes and upcoming regulatory changes are squeezing margins and increasing complexity – particularly for smaller portfolio landlords – making sound financial planning more important than ever.

The landlord evolution

Pegasus data shows that the average landlord today holds around 6.6 properties, with each property valued at £253,000. 42% have at least one interest-only mortgage, with the average landlord holding 2.8 mortgaged properties. There’s also a growing trend towards landlords incorporating as limited company structures.

The data shows that 8 in 10 landlords (85%) report a profit, with the average rental property generating £11,363 annually or around £947 per month in gross rental income. Overall, the average gross rental income from a landlord’s portfolio is £75,000 per annum. 

Tightening margins

But margins are tightening. At £25,000 a year, mortgage interest alone is equivalent to £8,900 per property or £68 per day and although 65% of landlords are raising their rents, Pegasus says this is the lowest level since Q2 2023. 

Landlords also face pressure with increased costs for everything from EPC compliance – the Government estimates that landlords will have to pay between £6,100 and £6,800 to comply with the need to increase to a C rating – to increased potential rental losses once the new eviction process comes into force on Friday with the introduction of the Renters’ Rights Act.