The high cost of titanium alloys can be reduced using alternative manufacturing techniques and using cheap alloying elements. In this study, the Ti-5Al-2.5Fe alloy, a cheaper α + β alloy than the workhorse Ti-6Al-4V, was produced by powder metallurgy combined with hot thermomechanical deformation by means of forging. The forged alloy was subsequently subjected to a heat treatment at 750 °C for several annealing times in order to modify the microstructure and tailor the mechanical properties. This study demonstrates that, regardless of the forging temperature used, annealing of the forged Ti-5Al-2.5Fe alloy improves both the strength and the ductility. Generally, the longer the annealing time, the higher the gain in strength and ductility with respect to the forged alloy. Moreover, annealing is significantly more beneficial to improve the ductility rather than the strength of the powder-forged Ti-5Al-2.5Fe alloy.