Existing landlords are expanding their property portfolios as house prices rise and demand from tenants continues to increase.

Landlords have been steadily increasing the number of properties on their books, with 130,000 buy-to-let loans advanced in the second half of 2005, an increase of 40 per cent on the previous six months.

The renewed interest in letting as an investment has been spurred by rising rents caused by an increase in the number of tenants as would-be first-time buyers are forced to rent. A recent survey from the Royal Institution of Chartered Surveyors showed rents climbing at their fastest pace since July 2001.

Moreover, the Government has predicted that the number of households in the UK will increase by more than two millions over the next 10 years, fuelled by a trend towards smaller households and a surge in workers coming to Britain from other EU countries.

The key to finding a buy-to-let opportunity that stacks up as a worthwhile investment is securing sufficient rent to cover the mortgage payments on the property. But the profitability of buy-to-let varies greatly across the UK, making the identification of hot spots essential to success.

The number of buy-to-let lenders has grown in recent years, and, as well as offering different types of mortgage, they all have different lending criteria.

The good news is that whereas you used to pay significantly more for buy-to-let mortgages than for regular mortgages, rates have come down significantly and are not much more than a standard residential deal.
As well as a 15 to 20 per cent deposit, you will incur all the costs associated with buying a residential property, such as stamp duty, legal expenses, surveys and search fees. Buying to let should be seen as a long-term investment, with 10 years a reasonable period.

You should therefore be prepared to have all this capital tied up for a long time.

Your home may be repossessed if you do not keep up repayments on your mortgage.
Article date: 10.06