They are the people making a killing from Generation Rent. As owner-occupation in Britain goes into steep decline, a new class of landlord is emerging, claiming they have never had it so good, with buy-to-let interest rates at historic lows and rents at historic highs.

The boom in lettings has also sparked a new phenomenon now sweeping the property market, known as "rent-to-rent" or "multiletting". This is where investors take a tenancy, paying the landlord the monthly rent, but then sub-let to many more tenants at a much higher price. Lounges and dining areas are converted into sleeping space, leaving tenants with only a shared kitchen.

Daniel Burton, 25, claims to be making £35,000 profit every month from his Rent the Rented business scheme, just a few years after dropping out of the London School of Economics. He sublets 200 rooms across the capital, bringing in rent of nearly £2m a year.

Meanwhile, the scale of some private landlords' property empires is staggering. Kevin Green in south Wales is challenging Fergus Wilson in Kent as Britain's biggest buy-to-let landlord, having bought 672 homes around Swansea and Llanelli since 2000, with plans to take the total to 1,000.

Former right-to-buy council homes have provided rich pickings for investors. It has emerged that Charles Gow, the son of Ian Gow, the Tory minister and Thatcher aide during the peak years of the right-to-buy boom, owns at least 40 ex-council properties. About a third of ex-council homes sold in the 1980s under Margaret Thatcher are now owned by private landlords.

Letting agents have also joined the ranks of the rental multimillionaires. Countrywide, Britain's biggest estate agency, makes far more money from lettings (£16.3m profit in 2012, up 49% on the previous year) than from selling houses (£4.4m, down 35% on the year before).

Home ownership in Britain peaked at 69% of all properties in 2001, falling to 64% in 2011, according to census figures, while the proportion of households renting privately has almost doubled from its low in 1981.

Data company Experian this week highlighted figures showing the growing disparity in property ownership across the country, naming Slough, Brent and Enfield as the areas where "younger people are most likely to be struggling to get on the property ladder". Home ownership in Slough fell by 14% during 2001-2011, with Bournemouth, Cardiff and Reading also seeing double-digit falls. Experian underlined a growing generational gap, especially in the cities. "Those who have traditionally bought first homes in city centres have seen a 13% decline in ownership and a 14% increase in renting," it said.

Renting the already rented

Dan Burton says he "got bored" studying at the LSE and stumbled into property after subletting spare rooms to student friends in 2009. Three years later, he claims to be making a £35,000 monthly profit, with 200 sublet rooms generating an annual rent of £1.8m. He is at the forefront of the "rent-to-rent" craze which enables investors to cash in without having to put up any capital to buy a house or flat.

He takes over the rental of a three-bedroom house that is already let out, then converts the "spare" dining and lounge areas into bedrooms. He does the same with one-bed flats, subletting them as two rooms with a shared kitchen. "You can jack the rent up that way," he reveals on PropertyInvestorAcademy.com, where he talks of the "wallet impact" of the scheme. He describes it as "arbitrage", where "I rent a property with a view to renting it out at a higher rent". In many cases, rent-to-renters can squeeze another £500 per month from a property, he claims.

"Potentially, there's a lot of money to be made. I sublet a room in the house I was in at uni after someone moved out and then started subletting friends' rooms elsewhere when people moved on," says Burton. "In summer 2010, I took over a landlord's property in Euston and let the rooms individually. After that I kept going – renting properties from landlords, then renting out rooms on an individual basis." He offers landlords a commercial agreement, guaranteeing the rent, while new tenants are put on a "licence" rather than a conventional assured shorthold tenancy. These are controversial in the lettings market, as they treat tenancies more like short-term holiday lets, making it easier to evict.

The king & queen of buy-to-let

Fergus and Judith Wilson, former schoolteachers turned buy-to-let property tycoons. Photograph: Martin Godwin for the Guardian

Former schoolteachers Fergus and Judith Wilson have 700 houses around Ashford and Maidstone, in Kent, bought using buy-to-let loans. "Life could not be better," they say. The typical rent they charge on a two-bed house has risen from £725 in 2008 to £850.

Many expected their debt-leveraged property empire to crash during the financial crisis, but the collapse in interest rates has left them making more than ever. On average, they pay 2.25% interest on their loans, with some of costing as little as 1.65%, compared with the 5% rates first-time buyers typically pay. "Properties that were breaking even or losing us £50 per month are now making as much as £900 a month profit," says Fergus. The average capital gain on his properties has been "£9,000 per unit over the past year", he says, suggesting he has made a paper gain of at least £6m. "For every £1 we are making in rent, we are making another £1 capital gain."

He expects home ownership in Britain to continue to decline to little more than half of all households, bolstering his rental business.

"There is such a shortage of property, it couldn't be better. Some of the tenants are telling me they have given up entirely on the idea of home ownership. Gordon Brown said we are 3m properties short in this country and he was right. Many young people have to get it into their heads that they are going nowhere in the property market. Thatcher sold off the social housing, which we could probably do with now, but that's all in the past." He adds that most of his new tenants are migrants from eastern Europe. "Around 90% of what we're letting in Maidstone is going to Hungarians … It's a landlord's market for the simple reason that there is such a shortage of housing."

The secret millionaire with 672 houses

Kevin Green only started in buy-to-let in 2000 but has now amassed 672 properties. Photograph: Graham Harries

Kevin Green was a frustrated dairy farmer who "always wanted to be a millionaire" and estimates his current wealth at just shy of £40m. "I don't go for yachts but I do have an Aston Martin and a Rolex," he says.

Although he only started in buy-to-let in 2000, he has amassed 672 properties and has set himself a goal of 1,000 homes, with all the mortgage debt paid off by the time he reaches his 70s. He follows what he calls a 3-2-1 strategy: he buys three houses, keeps two to rent out and sells the other for a profit. Most are bought off families or individuals facing repossession. "We stop the repossession and we help them into other properties. When we get in touch, they are facing eviction. We are saving their bacon," he says.

About 60% of the rent he receives on the properties, which are clustered around Llanelli in south Wales, comes from tenants on housing benefit and income support. Typical rents are £425-£475 a month and he says they have not risen much in recent years, as "they follow LHA [local housing allowance] rate rises".

"My typical property is the sort of thing you see on Coronation Street," he says. Is he crowding out first-time buyers wanting to get on the property ladder? "The affordability is there for first-time buyers – the properties we buy are something first-time buyers could afford, at around £80,000-85,000. The problem is the availability of finance for private buyers."

He regularly meets other major property investors. "We have an unofficial 'Mastermind' group, and we debate with groups like Shelter. My main gripe is that under universal credit, the benefits will go to the tenants [and not directly paid to the landlord]. We are going to suffer as tenants don't tend to be great at handling money."

In 2009, Green appeared in Channel 4's The Secret Millionaire programme in which he handed over £69,000 of his fortune to north Devon charities. He has also become an approved role model for teaching in schools under the Big Ideas Wales" scheme.Despite the mortgage famine, Green claims anyone can still do what he did. "I was homeless myself once. You have every chance I have."

The 'daddy' of multiple occupation

Jim Haliburton is the self-styled HMO Daddy, with a £10m-plus empire of 100 HMOs – houses of multiple occupation – with 800 tenants around Wednesbury, a depressed town in the West Midlands.

Some councils, such as Newham in east London, have been targeting rogue HMO landlords who cram tenants, often recent migrants, into decrepit and unlicensed properties. But Haliburton says HMOs have unfairly been given a bad name, and he is simply meeting a demand from what he calls "baggits" – people who just have a bag of possessions, "no job, no wife, no hope, who live in bedsit land. We get that sort of tenant."

A former lecturer at Sandwell College, he says he is not taking properties from the hands of private buyers. "I tend to go for properties that are cheap and that owner-occupiers wouldn't buy. I buy the crappy properties without gardens and parking. If they had a garden, the tenants would only throw rubbish in it."

Virtually all of his rental income comes via welfare benefits. "Rents are stagnant here. We only charge £60-£65 a week for a furnished room with bills included. We never come across tenants who can't afford to pay. If they can't, it's only because they haven't bothered to claim housing benefit. You'd be amazed how busy the unemployed are. They'd rather spend it on drinks or drugs."

He says universal credit, if paid directly to tenants, will be a disaster. "80% of the tenants who had money paid directly to them under LHA [local housing allowance] kept it. It was a great deal for the local off-licences and drug dealers."

Private-sector HMOs save the taxpayer money, he says. "Don't listen to the PR crap from the likes of Newham council. If these people were housed by the social sector, it would cost a huge amount of money. I've seen tenants come from hostels where the cost to the taxpayer has been £580 a week, while I get the £60 from housing benefit."

He insists that none of his properties have double-occupancy rooms, and that he maintains them to a high standard. But currently he's no longer buying more HMOs, partly because he finds 100 enough, but also because he's more interested in rent-to-rent. "I've stopped borrowing to buy HMOs. It's much easier to do a rent-to-rent, and very little costs in starting up."

The Tory minister's son with 40 ex-council homes

An investigation by the GMB union and the Daily Mirror into council house sell-offs in the flagship Tory borough of Wandsworth, south London, earlier this year found that 6,180 of the 15,874 dwellings sold under right-to-buy legislation are now owned by private landlords who rent them to private tenants.

Of the 120 homes in Sherfield Gardens, a council block in Putney, 62 had an owner with a different address – with 35 owned by Charles Gow, while his wife Karin owned a further five, through KCG Property, a lettings and management company. Its website lists maisonettes in the block for rent at £1,556 a month. Flats in the block now sell for about £230,000, suggesting that the Gows' company has assets worth more than £9m in Sherfield Gardens.

The GMB also traced other landlords who have bought up right-to-buy properties. Some were owned by farmers in receipt of European farm subsidy payments; others were registered through companies in Guernsey, the British Virgin Islands and Mauritius.

Paul Kenny, the union's general secretary, said: "Private businesses are making vast profits from the public purse while the people these homes were built for sit on waiting lists that never move. You could not make it up that the family of one of Mrs Thatcher's aides, who served as housing minister during the high tide of right-to-buy, ends up owning a vast swathe of London's ex-council housing. The 'right to buy' has turned into a rich harvest for greedy farmers and others."

The Guardian approached KCG Property for comment but it did not respond.