Majority of Landlords Profit Despite Pressure: How to Mitigate Risks and Plan Ahead

Profitability Persists Amid Cost Pressures

Research from Foundation for Q1 2026 shows that 84% of UK landlords continue to make a profit, with average rental yields climbing to 6.5%. This resilience is notable given rising energy costs, mortgage rates, and inflationary pressures impacting operating expenses. Many landlords report growing confidence, with 42% anticipating property sales but many more expanding portfolios or refinancing to optimise financing.

Why This Matters to London Landlords

London's rental market often leads national trends, but cost pressures and regulatory changes are felt acutely here due to higher property values and tenant expectations. The increase in average rental yields is encouraging, but landlords face medium-level risk from softer tenant demand, void periods, and rental arrears. Additionally, upcoming EPC (Energy Performance Certificate) regulations will soon set stricter minimum energy efficiency standards for rental properties.

Practical Implications and Risks

EPC Compliance – A Near-Term Priority

From April 2027, landlords must ensure rented properties meet a minimum EPC rating of C in England. Failing to comply risks enforcement actions, fines, and difficulties securing tenants. For London landlords, upgrading often older, less energy-efficient properties requires budgeting for insulation, heating system upgrades, or window replacements.

Tenant Demand and Financial Stability

Some landlords report softer demand and longer void periods, impacting cash flow. Robust tenant screening and proactive rent collection are essential to reduce arrears and minimise income disruption. With the average planned rent increase at 5.7%, landlords must balance market conditions with affordability to avoid pushing tenants out.

Financing and Portfolio Strategy

Refinancing has emerged as a key strategy, allowing landlords to reduce interest costs or release equity amid fluctuating mortgage rates. Those considering selling (42% as per Foundation) should weigh market conditions carefully, especially as sale proceeds may be reinvested or used to upgrade remaining assets.

Tailored Advice for Different Landlord Profiles

• Single-Unit Landlords: Prioritise EPC upgrades now to avoid last-minute costs. Consider rent reviews aligned with the local market to maintain occupancy.
• HMO Landlords: Manage voids aggressively; multiple occupants mean higher risk of arrears but potentially higher yields. Ensure units comply with EPC and safety standards.
• Portfolio Landlords: Use refinancing to optimise debt across holdings; plan phased EPC improvements to manage costs and compliance.
• Accidental Landlords: Seek professional advice on compliance and cash flow; evaluate whether expansion or consolidation suits your goals.

Recommended Next Steps

1. Conduct a Portfolio EPC Audit: Identify properties below EPC C and prioritise upgrades.
2. Review Financing Options: Consult mortgage advisors about refinancing or restructuring.
3. Enhance Tenant Management: Implement thorough screening and timely rent collection.
4. Plan Rent Increases Strategically: Benchmark local rents, respect legal limits, and communicate clearly.
5. Schedule Quarterly Compliance Reviews: Stay ahead of policy changes, especially EPC and tenant rights.

How Rentals & Sales Can Support You

Our expert team offers comprehensive portfolio reviews focusing on profitability, compliance, and strategic growth. We provide tailored compliance audits to prepare properties for EPC regulations and market shifts. Our pricing strategy consultations help optimise rent within legal frameworks while sustaining tenant relations.

Contact us to arrange a consultation aligned with your portfolio goals and to mitigate medium-level risks ahead.

Disclaimer: This article is for informational purposes only and does not constitute legal or financial advice. Landlords should consult qualified professionals regarding compliance obligations and financial decisions.