Most buy to let landlords make profits despite rising operating costs, mortgage expenses and regulatory pressures, according to ModaMortgages’ analysis of research from Pegasus Insight.

The specialist lender’s analysis of the latest Landlord Trends report found that 85% of landlords are making a profit from their lettings activity, including 17% who describe their returns as a large profit. Meanwhile, just 4% say they are making a loss, with 11% breaking even.

Average gross rental yields remain unchanged at 6.4%, maintaining the levels recorded over recent quarters.

The research suggests that profitability has remained consistent over time. Since the beginning of 2020, the proportion of landlords reporting a profit has generally remained above 80%, apart from a period of pressure following the initial increases in mortgage rates during 2023.

Financing costs appear to be an important dividing line.

Among landlords who own their portfolios outright, 93% say they are making a profit, compared with 79% of those with buy to let borrowing.

Maintenance, upkeep and repairs represent the largest category of expenditure for both houses in multiple occupation (HMOs) and other rental properties.

Average annual operating expenditure is £17,665 for non-HMO portfolios and £28,168 for HMO portfolios, with maintenance and repairs accounting for 39% and 27% respectively.

Becki Fraser-Tucker, head of sales at ModaMortgages, said: “It’s encouraging to see rental yields holding relatively steady, but yield is only one part of the picture. Mortgage payments, maintenance, insurance and the everyday costs of running a property all have to come into the equation.

“What these figures show, though, is that buy to let is far from having lost its appeal. Well-run portfolios are still generating positive returns and there are still opportunities out there.”