Investment: 'Get the best deals – now'

Can you still make good money from buy-to-let? Chris Partridge meets two experts who want to show you how it's done
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At a time when many fear that a property slump is on the horizon, launching a book extolling the profit-making potential of buy-to-let would appear to be especially unfortunate, to say the least.

But Kate Faulkner, author of Property Investor's Handbook, which is published next month, believes that there is still money to be made in property if investors do their homework. And it's an opinion shared by David Lawrenson, an author who has just issued a revised edition of his book, Successful Property Letting.

The days when you could buy almost anything with a title deed and watch its value rocket are now over. But however tough the market, both authors believe there are still opportunities. "If you are a property investor, this is a fantastic time to buy because only a small number of other buyers are competing with you," says Faulkner.

Property indices only show averages, concealing huge variations over the country and even within an individual development, so investors who dig deep can often find bargains. "Indices show average prices going down, but that is not true of everywhere," Faulkner advises. "We are in an unusual situation where there is undersupply of family homes, for example, but oversupply in some areas such as two-bedroom flats – you should try to snap up bargains now."

David Lawrenson believes that first-time buyers have deserted the market, leaving the field free for investors: "A lot of first-time buyers are worried about the credit crunch and the possibility of a slump, so they are standing on the sidelines and it is easier to get a decent price."

And where are these first-time buyers living? In rented accommodation, of course. "As a result, we are seeing strong growth in rents, up to 19 per cent, according to Paragon," Lawrenson says.

But the experts disagree on many aspects of property investment, partly reflecting their backgrounds – Faulkner is a marketing professional and serial house-restorer who loves the practical side of property, whereas Lawrenson is a money man. So Faulkner focuses on identifying tenant demand and creating homes to cater for it, and Lawrenson more on financial controls and market analysis.

Over the next few years, only well-informed and motivated investors are going to make a living.

The ultimate message for investors is to take a combination of their two sets of advice, and then go out and do your own research and analysis. So, we asked them the questions that really matter:

What is the best type of property to buy?

Kate Faulkner: Look for a three-bedroom character Victorian house with big rooms and high ceilings, close to good schools.

David Lawrenson: Family houses are a good buy. Even if we start building them in any appreciable numbers it will be a while before supply meets demand.

Are two-bedroom flats a good buy?

Kate Faulkner: There are some fantastic deals on two-bedroom flats because the original buyers overpaid, but make sure you can get a tenant, and that you have a letting agent you can trust and who is on your side.

David Lawrenson: Flats are priced more reasonably at auction, where bargains are to be had, but I have seen blocks of identical flats with security problems and appalling management. One landlord I advise had several flats on such an estate in Manchester and I had to advise him to get out now.

Should investors look abroad for better prospects?

Kate Faulkner:There are big capital gains to be had in some emerging markets, but you must research it properly. Nobody would buy shoes without putting them on, so why on earth buy a property without seeing it?

David Lawrenson: It is worth while looking abroad but people need to be aware of the oversupply issue. Buying abroad exposes you to currency fluctuations, different tenancy laws, and the difficulty of managing something far away. You need to see a better return to compensate for the high risk.

Should I invest in property funds and/or syndicates?

Kate Faulkner: Yes. Would you put £30,000 into Boots shares? No, so why put it all your money into one buy-to-let property? You should spread the risk. You get exactly the same kind of return in a financial vehicle but with a whole lot less work on your part.

David Lawrenson: No. Nothing beats doing it yourself. I don't like the idea of fund managers getting 2 per cent of my money.

What is your hot tip for investors in today's rocky market?

Kate Faulkner: Look at property that has land attached, or commercial premises that might be converted into residential. It is a lot of risk and work, but you can reap great rewards. And get in a lodger under the rent-a-room scheme, which is worth £4,000 a year tax-free, for starters.

David Lawrenson: There are some hitherto undiscovered coastal towns, property-wise, where second- home owners are moving in, known to locals as DFLs – Down From London – who are pushing prices up.

'The Property Investors Handbook', a Which? Essential Guide, is out on 10 March at £11; 'Successful Property Letting' is published by Elliot Right Way Books at £10