THE great buy to let bonanza may be over but many experts believe it is still a sound investment.

The combination of a stable property market and a rise in the number of young people opting to rent has led to the residential property sector remaining a popular choice for investors.

"Last year there was a lot of talk of a property crash, says Lee Grandin, managing director of Landlord Mortgages in Wokingham, Berkshire: "Sceptics predicted that higher interest rates and slower growth would lead to landlords getting cold feet and baling out en masse. But the bust cycle never happened and the market had a soft landing leaving plenty of investment opportunities."

According to research from the Centre of Economic Research, the private rental market is set to increase to 3.5m homes over the next 8 years fuelled by rising immigration and lifestyle changes that will make renting more attractive.

A survey by Bradford & Bingley also reveals a high level of confidence among landlords.

Its research revealed four out of five investors feel the same, or more positive about investing than they did last year with 91% of landlords claiming that in 2005 rent levels either stayed the same or increased.

Its survey found that investors are continuing to earn a good income from their property portfolios with 49% earning over £15,000 per year.

Buy to let mortgage broker, Mortgages for Business believes 2006 will be a year when experienced investors continue to build up on their portfolio and those interested in dipping a toe in the market take a more cautious approach than the stampede of previous years.

Andrew Ross, manager at Mortgage Express says: "Demand for rental properties is set to rise 3% per year over the next ten years due to social and demographic trends. More young people see renting as a lifestyle choice whilst they search and save for their first property. In addition, there are an increasing number of students who will be looking to rent."

But while many people invest in buy to let to provide for their pension, an increasing number are using their properties to embrace a more flexible way of living.

A recent survey by Standard Life found that 1 in 5 landlords are using the money earned from their property to travel, reduce long working hours and set up their own business.

"Earnings on successful buy to let properties can be significant and provide landlords with income to change their lives: "says Andrew Boddie, head of marketing at Standard Life Bank: "Our survey revealed that a quarter of all respondents are earning up to £200 more than their mortgage commitments every month, 27% are earning between £200 and £500 extra and 13% are earning up to a £1,000 per month."

But while buy to let remains a solid investment, Lee Grandin, of Landlord Mortgages urges caution. He warns investors to thoroughly research the market and not overstretch their borrowing before taking the plunge, he says: "Landlords can avoid problems by budgeting for void periods, being careful about location and type of property and ensuring that the rent more than covers mortgage and running costs."

The key to investing in buy to let in 2006 is to focus on areas where house prices are firm, research the market carefully and look for properties that are likely to be in demand but renters are likely to be in short supply."

By GAYNOR PENGELLY

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