What is buy to let?

Buy to let involves purchasing property with the specific intention of renting it out to tenants. The UK buy to let market is booming – worth at least £30bn – and this form of property investment is an increasingly popular alternative to more traditional pension schemes. Buy to let landlords own an average of 7 properties but don't let that put you off – if you already own your house and provided you do your homework carefully, there's no reason why you can't join the growing band of buy to let property owners.

Do your homework

According to figures published by Hometrack, average residential values in October 2006 were 4.9% higher than a year ago - the fastest year on year rate of growth for over two years. Average growth in London is even higher – close to 12% for 2006. If you're keen to maximise profits, it's tempting to join the thousands of landlords letting properties in London and the South East. But before you jump on the bandwagon, consider the following:

• Buy to let investors who purchase property locally tend to prosper. By buying close to where you live, you benefit from local knowledge and can be on hand to keep an eye on the property and deal with any tenancy issues personally.
• London and the South East have high demand for housing so yields are attractive, but the property is much more expensive to begin with.
• Plenty of towns outside the Home Counties offer reliable rental returns. Birmingham is one such example - with only 11% of housing being privately rented yet with 23% of the workforce aged 18-30, it's an ideal spot for buy to let. What you're looking for is a large, young working population and a shortage of rental accommodation.

Once you've chosen your area, get help from a letting agent who knows the area – they will be aware of current demand, and the likely pitfalls of certain properties or areas. A good tactic is to approach agents as a potential tenant to get a less biased view of local market conditions. Keep tabs on the local media – finding that there has been a spate of burglaries will explain why sellers are keen to hand you a "bargain", and plans to build a bypass or an airport nearby can adversely affect property values too. More specific publications like Residential Property Investor can keep you up to date with what's hot in your local property market – you can get a free copy by requesting an information pack from the Residential Landlords Association.

A few more tips for picking a good investment property:

• Look for a property which requires little maintenance. A big garden might seem attractive but it's unlikely to increase the rental value.
• Focus on the needs of your target market, but also look out for benefits that will appeal to all tenants, like nearby shops and easy access to public transport.
• Naff décor can give you bargaining power when it comes to buying a property, and it often costs relatively little to put right.
• When it comes to major, structural issues, however, stay well clear, and always get a full survey before you buy.