Is now the time to buy-to-let?

There are now 130,000 buy-to-let mortgages, worth about ?10bn, outstanding in Britain today.

Buying-to-let has never been easier: more than 50 lenders now offer this type of mortgage, and, historically, low interest rates have enabled many more people to consider this form of investment.

But why has buy-to-let become quite so popular? And, given recent world events and the current economic downturn, is it still such an attractive option?

The 1988 Housing Act, which improved legal protection for landlords, made investment in residential property more attractive. Social factors, such as the increasing number of single people and the growing tendency for people to work far from home, have also contributed to the popularity of renting.

But there is little doubt that the major catalyst for the explosion in buy-to-let in recent years has been nervousness over stock market volatility and disappointing returns from pensions and other long-term investments.

"Property is definitely the place to be when the markets are down," says Donna Bradshaw, of independent financial advisors, Fiona Price & Partners.

Certainly, when stock markets are erratic, the prospect of capital growth and regular income from rental, makes buy-to-let properties seem very attractive, particularly when yields can easily reach 7 to 8% a year. As long as interest rates are so low, property is still a better investment than pure savings and more and more people are putting their retirement money into property.

But buy-to-let should never be regarded as a short-term investment, warns Ms Bradshaw. The property market experiences periodic slumps and a long-term view is vital to ride out short-term dips.

The property market also reflects the general economic situation and, although buy-to-let is still resilient nationwide, lettings in central London are much less buoyant.

"In central London, the market is very different," explains James Wilson, director of Residential Property Investment, at Lane Fox. "US nationals make up about 45% of tenants and job redundancies, resulting from the fall in the global equity market over the last 18 months, were exacerbated by September 11."

And, because the central London market is driven by ex-patriots, it is particularly sensitive to financial fluctuations, says Betsan Wyn-Davies, head of lettings at FPD Savills. "The gap left by US tenants is not being filled and this is creating a knock-on effect in non-central London."

Despite this, all major agents remain convinced that investment in property is still a good idea, in the long term. According to David Moulton, residential research manager with Knight Frank, 15% of all its transactions in London this year, have been for investment purposes.

"Property is still a very popular investment. Lots of city bonuses are invested in property," he says. And this view is confirmed by Richard Cotton, of Cluttons, who is confident the private residential lettings sector is here to stay, although he does warn that now may not be the best time to make an investment.

So what should potential buy-to-let investors look for?

As with any other major financial decision, buyers should always do their homework first. Financial advisors, John Charcol, urge anyone considering buy-to-let to decide if their priority is growth or regular income, as this will determine whether they buy in a prime city centre or suburban location.

Check out the potential market and make sure the location is right - if possible, you should select areas where you would be prepared to live yourself.

Remember, when you rent out a property, you become a landlord, responsible for the upkeep of the property. Most advisors recommend that investors treat their investment as a small business and ensure they always have sufficient money for repairs and maintenance - finding a reliable handyman is also vital if you are unable to do these tasks yourself.

Most lenders will require a decent deposit and will want to see rental income of at least 125% of your mortgage repayments. It is also vital to have enough cash to tide you over in void periods - budget on two barren months for every 10 of tenancy.

Contact the Association of Letting Agents (Arla) who will put you in touch with letting agents in your area and will also provide you with details of the expenses you can offset against tax. The Council of Mortgage Lenders publishes a leaflet and checklist on buying-to-let.