Dennis, there are many ways for small investors to make money from residential property besides BTL: renovate, extend, subdivide, demolish and develop new housing at greater densities, buy land and build new - all offer a decent profit, especially if you use mortgages and loans to gear and multiply your limited capital.
I grant you though that buy-and-hold BTL is far, far less attractive now for new entrants. Continuing high interest rates c. 5-6%, especially on higher mortgage multiples, plus maintenance costs, agent's fees, and a rogue tenant can easily wipe out all profits from income. The endless legislative changes can wear anyone down. The tax net keeps tightening, and the new restrictions on deducting mortgage interest mean higher-rate taxpayers can end up paying income tax on negative real-world profits. The only real gain, outside development work, is from house price inflation, but with house prices so high in most areas, future real gains look to be limited, especially with residential property paying CGT at 28% when you sell (the only asset category taxed at such a very high level).
If I were setting up in BTL now, I would invest via a company or partnership rather than as a private individual: no limits on mortgage interest deductions, only corporation tax to pay (and the tax on dividends), scope to reclaim VAT on new-builds, plus I'd make sure the company had a development wing so it's taxed as a trading entity rather than an investment one There are considerable advantages with succession planning too. The main problem, as ever with a business, is getting your money out again, which is why shorter-term partnerships and Special Purpose Vehicles are the way forward for small silent partners who don't want to get involved day-to-day but seek better returns than REITs can offer..