Fewer people than ever are opting to become a hands-on landlord, inspecting properties and dealing with tenants’ maintenance issues.
In fact, existing landlords are selling up in droves — and a Lendlord survey revealed a third were planning to sell properties or pause investment in 2026.
But that does not mean the property investment sector is no longer viable. Instead, it means investors should be thinking bigger — and looking at the alternative options out there as opposed to BTL.
The downfall of BTL
Return on investment is always the main factor to consider across any sector, not just within the property industry. A number of changes in government legislation, as well as the wider economic picture, have seen the ROI prospects associated with BTL drop significantly over the past few years.
Tax is now paid on the entire rental income, with expenses no longer deductible and relief no longer based on individual tax brackets but set at 20% for all — a significant reduction for higher earners who could previously claim up to 45% off their mortgage interest payments.
In addition, volatile economic conditions and the impact of major events like the pandemic and Brexit have had a significant effect.
This situation certainly has not improved since 2023, and Renters’ Rights Bill, which has now been enacted into law, is unlikely to prove positive for landlords either. Among the most prominent changes coming into effect in the coming months will be the introduction of upfront payment and rental rise limits and the eradication of fixed-term tenancies and Section 21 notices, commonly known as no-fault evictions.
Property investment alternatives
It is clear there is still very much a need for investment into the industry, which is why alternatives to traditional BTL models are being sought by those looking to maximise their ROI while minimising risk.
Protection against inflation, and subsequent interest rate rises, is offered when investors look at a structured model, which enables them to form an agreement with a property developer setting their own interest rates and terms. Often known as a ‘loan note’, this arrangement means investors are clear from the outset how much they stand to profit and over what amount of time.
In terms of the return on investment, property bond rates are normally set at around 10%, much higher than those normally seen with BTL arrangements, ISA savings and bank account savings.
This type of structured deal also usually represents a much reduced time investment too, with none of the hands-on tasks associated with being a BTL landlord — meaning investors enjoy the financial rewards of an arrangement, without the complexities of managing a portfolio or the specialist knowledge needed in order to oversee building their own developments, also known as build-to-rent (BTR).
While it is undeniable that the property industry has changed dramatically in recent decades, it remains a viable prospect for those open to investing their money in alternative projects. Specialist advice should naturally always be sought in order to ensure any structured deals entered into are done so with the minimal possible risk and the maximum potential rewards available.
But while BTL is becoming a less favourable option year on year, there are some very lucrative arrangements to be made when it comes to alternative property investment.
So, it should not be a case of writing off the property sector when it comes to investing, but rather a case of thinking bigger and looking at all of the options available; with the right deal, the industry remains a valuable prospect, and it is already proving its worth for the increasing number of investors securing loan notes with impressive ROIs.
