At 5.6% on average, yields are at their lowest point for three years, and at the joint lowest level recorded in the past eight years, according to the study by BM Solutions.
Buy-to-let investors with the largest portfolios have been worst affected.
Three quarters of landlords managing between 11 and 19 properties reported a fall in profitability over the past three years.
At the same time, the level of voids – any length of time when the property isn’t occupied – in the final quarter of 2018 was the highest recorded over the past five years.
Almost one in four investors now plans to sell at least one property this year – those with larger portfolios are twice as likely to sell.
And one in seven landlords plan to buy more properties.
Landlord confidence in prospects for capital gains has fallen, along with sentiment towards the UK economy, the survey showed.
Just one in four landlords reported an increase in perceived tenant demand in the last three months but this varied across the country.
The East Midlands registered the highest demand, while a third of landlords in central London felt it was falling.
Landlords in the North of England were most likely to experience void periods, while those in the South East and West Midlands were least likely
Phil Rickards, head of BM Solutions (pictured), said: “The buy-to-let industry has been through many regulatory changes over the past few years, and the effects of this are clearly being felt.
“However, the landscape is not entirely bleak. The proportion of landlords making a profit from their lettings activity remains at 88%, equalling the record high seen in quarter three 2018
“It is clear that the market is sensitive to the current legislative and macro-economic environment and this has been reflected in the latest findings.”