The past few years have seen a dramatic increase in the number of women investing in property - one in four buy-to-let investors is female. Some prefer to put their money somewhere tangible - like bricks and mortar and others may see property investment as preferable to making pension contributions.

However many experts believe that property is now overvalued and as the market begins to cool, if you are considering getting into the market now, you need to be aware that you are unlikely to see the kind of capital growth we have seen over the past few years; indeed, you may see none at for some time.

What this means for your investment is that the yield you are able to obtain becomes crucial. The good news is that rents are rising fast thanks to rising tenant demand. Figures from the Association of Residential Lettings Agents (Arla) show that tenant demand outstrips supply in all areas of the rental market, while in London, 65 per cent of Arla agents say there are now more tenants than properties available.

So what should you bear in mind when looking for an investment property?

Finding the right property

While location is important - as the property cliché holds - price is critical. When you purchase a buy-to-let investment, you need to make sure that the figures stack. In other words, you need to make sure that the rent you will be able to charge on the property is sufficient to justify the purchase price.

Lenders have traditionally insisted that the monthly rent on the property should be at least 130 per cent of the mortgage interest payment. And although that rent-to-interest calculation is no longer an absolute requirement in all cases, it remains a good guide to whether an investment is worth pursuing. Bear in mind that in addition to your mortgage there are myriad other costs associated with buy-to-let (see below), and that your property will not always be rented: there will be void periods.

"Bear in mind that in addition to your mortgage there are myriad other costs associated with buy-to-let, and that your property will not always be rented: there will be void periods."

Many amateur buy-to-let investors purchase property near to their own home. To some extent, this makes sense: you are likely to be familiar with the area, you know what sort of people live there, you may have an idea of what sort of property is in demand, and so on.

However, you should only buy close to home if you can find the right property at the right price. You need to do plenty of research. Talk to lettings agents. What sorts of properties are in demand in the area? Is it family homes, flats for young professionals or student accommodation? Don't be afraid of letting to students: despite the stereotype, they can make very good tenants. Moreover, voids on student accommodation tend to be very low.

Keep the tenant happy

Most problems with tenants occur in the first few months of a new rental, and the majority of these problems arise over minor matters. It may be worth doing a demonstration of how everything works when the tenants first move in.

"Any rent increases should only reflect an increase in demand for rental property."

You must also respect the rights of your tenants. You cannot enter the property without their permission, or when they are not there. Make sure that you give plenty of notice - at least three months - if you intend to increase rents. Any rent increases should only reflect an increase in demand for rental property: remember that while higher rents are desirable, the landlord's ultimate goal should be to keep void periods to an absolute minimum. Raise your rents too far and you risk losing the tenant.

Tax

You must pay stamp duty on your investment (this ranges from 1 to 4 per cent, depending on the purchase price of the property), as well as income tax on your rental payments. You are permitted to deduct allowable expenses, including mortgage interest payments, letting agent, legal and accountancy fees, buildings and contents insurance and the cost of running repairs.

When you sell a property, you must pay capital gains tax on the profit. The rate of CGT used to range from 10 to 40 per cent, depending on how long you had held the property; however, in this year's pre-budget report, the Chancellor of the Exchequer, Alistair Darling, announced proposed changes to the way CGT is levied. As of April 2008, there will be a flat CGT rate of 18 per cent.

Extra costs

In addition to your annual tax bill, there are many other costs associated with buy-to-let. These include:

• Solicitor's fees: expect to pay around £500.
• Mortgage arrangement fees: these can now be very high. Flat rates are usually around £1,400, but many lenders charge a fee of up to 2.5 per cent of the amount you borrow.
• Surveys: a full structural survey costs upwards of £800
• Insurance: in addition to buildings insurance, you should also take out landlord's insurance, which covers your furniture, fixtures and fittings, but more importantly gives you property owner's liability cover.
• White goods: even if you let the property unfurnished, you will need to provide a washing machine, cooker and fridge.
• Maintenance: expect to spend around 5 per cent of your annual rental income on maintaining the property
• Managing agent: hiring an agent to manage the property for you makes your life as a landlord much simpler, but it usually costs around 15 per cent of your rental income, plus VAT.

By Paula Hawkins