According to Pegasus Insight’s Landlord Trends survey, the majority were making a profit, with 84% of landlords describing their rental operations as profitable.
However, it marks a second consecutive quarterly decline as the gap between revenues and rising operating costs continued to narrow for some.
The share of landlords making a loss fell to 4% in the first quarter of the year (Q1), down from 6% in Q4 2025. This suggested that the picture remained manageable for the majority, despite an increasingly demanding operating environment.
It was landlords operating multi-occupancy homes (HMOs) who were hailed as the ‘standout performers’, with an average return of 7.6%. This was well higher than the market-wide figure.
In terms of location, the Northwest generated the strongest returns, with an average return of 7.1%.
Meanwhile, London-based landlords continued to bottom out at 5.3%, reflecting the capital’s higher acquisition costs relative to rental income.
Although landlords were under pressure, tenant demand provided a supportive backdrop, Pegasus Insight found.
More than half of landlords, 58%, rate tenant demand as strong, although this figure is down 15% compared to the same period a year ago.
Tenant Trends research among 3,000 private tenants confirmed that occupancy rates were stable. The average renter has now lived in their current home for an average of 5.3 years, a figure that is gradually increasing. Two-thirds say they plan to stay longer than their current agreement, planning to stay an average of another 4.3 years.
Only 17% of renters planned to leave their current home, with most citing personal circumstances, such as moving or expanding, rather than dissatisfaction with their lease.
More than two-thirds rate their recent rental experience as positive – a figure that has remained stable year on year.
Mark Long, founder and director of Pegasus Insight, said: “The stabilization of interest rates at 6.5% is a more encouraging sign than it first appears. After a period of gradual weakening, this suggests that the sector has found some degree of equilibrium, at least for the time being, even as regulatory complexity and cost pressures continue to increase.
“What the data consistently shows is that profitability is increasingly a function of portfolio structure. Healthcare landlords, landlords with larger portfolios and landlords operating through limited company structures continue to demonstrate greater resilience, while more traditionally structured portfolios have less cushion as costs remain high.
“The tenant picture is a really important context here. Long leases, strong satisfaction scores among those with direct landlord relationships and continued intent to stay all point to an occupancy base that is much more stable than the regulatory debate would suggest. For lenders and investors, that underlying stability is a fundamental part of the buy-to-let investment case.
“The challenge for the sector is to translate that structural stability into lasting confidence. With landlord sentiment still subdued and divestitures continuing to outpace acquisitions, supply remains under pressure. How the market responds once the Renters’ Rights Act comes into effect will be the defining question for the year ahead.”