Landlords spend up to 45% of rental income on rising costs

Non-HMO landlords are allocating around 25% of their gross rental income to their portfolio running expenses, with HMO operators reporting figures close to 45%, research reveals.

According to Pegasus Insight, those proportions mark a big rise in maintenance and repairs, which now represent between 31% and 39% of overall expenditure.

Average annual costs have reached £19,604 for standard buy to let property owners and £35,720 for landlords managing HMOs, the firm’s Landlord Trends Q3 2025 shows.

Running costs and compliance

The firm’s founder and director, Mark Long, said: “Maintenance and repairs have always been a core cost for landlords, but what we’re seeing now is a step-change in scale.

“Even with yields at multi-year highs, a growing share of rental income is being absorbed by day-to-day running costs and compliance demands.”

He added: “For many landlords, particularly those with older stock or more complex portfolios, the challenge is no longer generating income, it’s protecting margins in the face of rising costs.”

Timely repairs are challenging

However, Mr Long warns that higher spending does not automatically translate into an improved renter experience.

He explains: “Our wider research shows that landlords are investing more than ever to keep properties safe, compliant and habitable, yet maintenance remains a pressure point in the rental relationship.

“Rising labour costs, supply chain issues and higher tenant expectations all make delivering timely repairs more challenging.”

That, in turn, leads to higher rents as landlords look for ways to fund the ongoing investment required to keep properties in good condition.

Costs growing for landlords

The research points to a shift in how rental is used with the average portfolio generating around £79,000 per year before deductions.

Pegasus says that nearly £20,000 of that disappears into everyday costs for non-HMOs.

The difference for HMOs is driven largely by utilities, where the spend is more than four times higher at 16% compared with 4% for other landlords who don’t offer bills included.

And even though landlords have seen a period of robust yields, many describe dealing with tighter cash flow than those returns imply.

They also say that older rented homes require constant attention and the compliance burden has intensified across the country.

In addition, landlords also face increasing professional fees, servicing contracts and insurance premiums – leaving little wiggle room when major repairs occur.