"Our research shows landlords are adapting well, supported by falling mortgage costs and a strong underlying rental market"
- Sam Humphreys - Dwelly
New research from Dwelly suggests that landlords are seeing improved net returns on their investments, even as start-up costs climb and total buy-to-let income declines.
The analysis examined typical costs and income streams for landlords, including acquisition expenses, operating outgoings, rental yields, and capital appreciation. It compared data from 2025 with the previous year to assess shifts in profitability.
Start-up costs rise sharply
Becoming a landlord now requires an average initial outlay of £16,824, marking a 63.3% increase from £10,302 in 2024. The primary factor driving this rise is a 76.9% increase in Stamp Duty Land Tax (SDLT), which has reached an average of £14,926 due to higher rates on additional properties.
Other common start-up fees, such as agency tenant-find charges and costs associated with digital tax compliance, have remained broadly consistent year on year.
Ongoing costs see a notable drop
Annual running costs have fallen by 24.6%, dropping from £15,694 to £11,829. Mortgage interest payments have accounted for the most significant saving, down 39.6% from £10,210 to £6,162, following reductions in variable interest rates.
There has also been a slight decrease in maintenance and repair expenses, which are down 5.1%. However, costs related to void periods and landlord insurance have both increased during the same period.
Income edges up, but overall returns dip
Average annual rental income has risen 3.6% to reach £15,684. However, combined income from rent and capital appreciation has declined by 6.6%, falling from £29,901 to £27,923. The drop is linked to slowing house price growth, with capital appreciation down from £14,757 to £12,239.
Despite this decline in top-line returns, landlords are retaining more profit after covering annual expenses. The average net return now stands at £16,093, up 13.3% from £14,206 in 2024. The improvement is largely driven by falling ongoing costs.
“What matters most is the return,” says Dwelly
“Today's rental landscape is more complex, with higher up-front costs and slower capital growth,” said Sam Humphreys, head of M&A at Dwelly. “But our research shows landlords are adapting well, supported by falling mortgage costs and a strong underlying rental market.”
Humphreys added, “What matters most is the return, and it's going up. That's a strong sign that, even in a tougher market, well-managed properties can still outperform.”
