Landlord profits hold firm but confidence slides

Most landlords are still making money from their portfolios, though the Renters’ Rights Act is now weighing heavily on expectations for the months ahead.

Research from Aldermore found that 84% of landlords say their lettings activity is profitable, with average achieved yields reaching 6.5% in the first three months of the year.

That figure is up slightly on the previous quarter and matches the joint second highest quarterly yield recorded over the past five years.

However, profitability is not spread evenly across the sector with unencumbered landlords are more likely to report a profit than those with borrowing, at 90% compared with 77%.

Larger portfolio landlords are also reporting stronger levels of profit than smaller operators, with Aldermore pointing to a divide between more professional landlords and part-time investors.

Reasons to hope

Jon Cooper, the lender’s director of mortgages, said: “If you’re a landlord or a broker, there are reasons to be hopeful here.

“Five out of every six landlords (84%) report their lettings activity being profitable.

“The average achieved yield is 6.5%, up slightly since last quarter.”

He added: “Encouragingly, this is the joint second highest quarterly yield within the last five years.

“Generally speaking, we’re seeing that the more professional and sophisticated landlords are navigating the changing market with greater confidence, whereas part-time landlords with smaller portfolios can struggle to adapt.”

Strong tenant demand

Tenant demand is still being described as strong by 58% of landlords, but that has fallen from 61% in Q4 2025 and from 73% in Q1 last year.

The fall has been persistent and in Q1 2024, 83% of landlords considered tenant demand to be strong, with the figure declining every quarter since then.

More landlords are now describing demand as average, while Aldermore also recorded a smaller rise in those reporting weak tenant demand.

Expectations for landlords’ overall lettings business have fallen to their lowest point since Q2 2023.

In Q1, 27% of landlords said they felt positive about their lettings business, compared with levels in the mid-30s during the previous two years.

RRA causes concern

The Renters’ Rights Act is a major concern in the research, with only 8% of landlords expecting the legislation to have a positive impact on their portfolios.

A further 16% expect no impact, while 70% expect a negative effect and 5% remain unsure.

Court capacity is also causing concern, with nine in 10 landlords worried about potential backlogs in the system for evicting tenants.