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Savings interest rates are currently wallowing at almost derisory levels. Lloyds, for instance, is now offering a mere 0.05 per cent on savings accounts, leading many to make the flippant point that you might as well keep your money under your mattress. In this environment, of course, a great number of people will be looking at alternative ways to boost their wealth. A foray into the buy-to-let sector will appeal to many of these investors since, even with the recent tax changes, there is serious profit to be made through renting out residential property. There are, though, several pitfalls in the path of those considering buy-to-let investments. In this short guide, we set out a few tips to bear in mind, as you navigate what can be a complicated market.

1. Be realistic

While buy-to-let investments can be profitable, they won't usually transform you into a super rich property mogul. There are one or two inspirational stories of individuals who have made their fortune through their buy-to-let portfolio. The average amateur landlord, however, will typically make healthy but modest profits. There are numerous factors that can curtail your revenues. Houses, for instance, can remain empty for a time even in the most robust rental market. Similarly, there are numerous new government measures in place that are specifically designed to reduce the incentives for this type of investment and leave more homes available to first time buyers. It is conceivable that this new regime will drive your rental income downwards.

It's equally important to bear in mind the effort involved in being a landlord. As well as attending property auctions, you will need to closely scrutinise local property listings, both of which can take up a great deal of time. You will need to carry out whatever renovations are needed to bring any house you buy up to scratch for letting and, crucially, you will need to do any maintenance that is needed when you have tenants in place. You need to be satisfied that you can add these activities to your schedule. There are, of course, agencies which will do this work for you, but the cost of their services will naturally eat into your income.

If you have considered these issues and decided that buy-to-let is the right option for you, do remember that you will face competition for houses and flats that are suitable for the rental market, so you won't necessarily be successful in your early efforts. This happens to everyone starting out in this market, so it's vital that you don't get too depressed or despondent about any failures when you first set out.

Finally, you may need to develop a fairly thick skin. The media aren't universally flattering about landlords and some of their criticism filters through to inform the public's opinion. While the vast majority of people understand and respect what you are trying to do, you will almost inevitably read the odd article decrying landlords. You cannot afford to take this sort of commentary too personally.

2. Do your research

Once you've decided to take the plunge into buy-to-let, you will be understandably enthusiastic and anxious to get started. However, it's crucial that you take the time to do your research, so you don't end up buying a money pit or an expensive white elephant.

The central things to study are:

- The local housing market, house prices and rental prices. Veterans of this market say that the value of getting to know local estate agents cannot be overstated. Agents are invariably clued up about the area you are considering and can give you a vital heads up about new houses on the market as well as about the idiosyncrasies of the neighbourhood. Read local Chatterbox sites, too, since they are often used to discuss housing matters.

- Property auctions and how they work. It's worth attending one or two auctions on a dry run basis, so you know what to expect before you get involved in bidding.

- The type of tenants you hope to house and the rental returns each group tends to yield.

- Local developments that may affect the rental market negatively or positively. Consult your local authority about any planning applications for projects in your area. A brand new Tesco Extra, for instance, might affect your rental ambitions depending on your target tenants.

- The legalities associated with being a landlord and any regulations with which you will be expected to comply. There is a great deal of information available online around property law, but it is almost always better to talk to a specialist lawyer.

- Taxation issues. As mentioned above, the tax laws applying to buy-to-let investments have changed, so it is hugely important that you talk to a lawyer or an accountant about your financial liabilities.

- Financing. If you aren't paying cash for your investment, you will need a specialised buy-to-let mortgage. The criteria applying to these loans are somewhat different from standard mortgages, so you should do some housekeeping on your personal finances to make sure you will be eligible for this type of funding.

3. Due diligence

When you have found a suitable property to buy, it's important that you undertake the same research as you would if you were buying a house for you and your family. This means making sure the property is structurally sound, how much work is needed to make it fit for purpose and any local developments that might impact on your investment. If you plan on seeking a mortgage, do make sure that the house you have in mind is accepted as security for the loan. For example, many lenders won't offer mortgages secured on flats over restaurants.

The team here at Nethouseprices will bring you more tips and advice for buy-to-let in a future issue of this series of guides. We constantly monitor the news for any developments that will affect you and your investments in property. Visit us again for more news and analysis.