Am I the only person who throws things at the TV when doom merchants rant on about a falling property market? As I and other investor friends see it, 2008 could be our year, writes Michele Andrew, Editor Sq Ft magazine.

The future for landlords could be surprisingly positive. The Royal Institution of Chartered Surveyors recently reported record growth in the demand for rental property, and the National Landlords Association claims one in four landlords are feeling so confident they are planning to grow their property portfolio significantly over the next five years.

Whether you're an experienced landlord with a large property portfolio or an amateur investor poised to dive into buy-to-let property, next year looks to be an interesting year.

The downside could be:           

  • Increased mortgage costs following five interest rate rises
  • Predictions that house prices will flatten out or fall, reducing the likelihood of significant capital growth
  • Fewer transactions in a weaker property market.

Yet, on the upside you have:

  • The chance to capitalise in a buyer's market where repossessions are set to rise
  • A predicted 10% increase in rental demand,
  • A growing pool of immigrant tenants and first-time buyers who cannot afford to buy or who prefer not to do so in an uncertain market
  • A drop in interest rates on the horizon.

Whether you are looking ahead to snapping up repossessions or are more concerned about falling returns, it's important to reduce expenditure to maximise your investment. Sq Ft Property Investor Magazine suggests 3 steps to success:

  1. Use a specialist mortgage broker.
  2. Offset your interest payments and expenses against income tax.
  3. Take out emergency cover insurance to cut down on repair costs and hassle.
Use a specialist Mortgage Broker

Many buy-to-let mortgage lenders only offer their products through brokers. Specialist mortgage brokers have access to exclusive deals you can't find down the high street or on-line. These specialists know the lending criteria of the big-name and obscure buy-to-let lenders.

If you want to get the most competitive buy-to-let mortgage deal, it is a good idea to use a whole-of-market broker, who will be able to shop around the entire mortgage market and advise you on what is available.

Most of us landlords opt for interest-only mortgages. For those new to the property game, let me quickly summarise. With this type of mortgage, you only pay the interest on your debt every month (no surprise there). This leaves repayment of the capital sum until point of sale. While this will cost you more overall in interest payments, it does have two distinct advantages:

1. It makes your mortgage payments more affordable in the face of interst rate hikes.

2. It is tax-efficient. You can offset your interest payments against your income tax, and when you come to sell, your liability for Capital Gains Tax may potentially be reduced.

Offset your expenses

Buy-to-let landlords are seen as business owners by the Inland Revenue. This means some of your expenses can be deducted from your gross income for tax purposes. A good accountant will be able to ensure you take full advantage of your tax allowances for:

  • Wear and tear of carpets, fixtures and fittings
  • Cleaning costs
  • Costs of advertising the property
  • Buildings and contents insurance
  • Insurance policies on boilers or white goods
  • Maintenance costs
  • Any ground rent or service charges

You can even class your accountant's fees as a business expense.

Take Out Emergency Cover Insurance

One of the best ways to reduce buy-to-let costs down is to take out emergency cover insurance, instead of using a letting agent.

Letting agents up to 15% to arrange for emergency repairs to be carried out, and you still have to pay for the repairs yourself.

Landlord's emergency cover insurance, offered by companies like Quoteline Direct , only costs around £20 a year and will cover you for emergency repairs up to £300. Tenants can also call a 24-hour emergency hotline - so you don't have to deal with the problem yourself at all.

The future

Who can say what the future holds for buy-to-let? In an uncertain market, it's vital to maximise profits and make the most of your investment. But if you can keep your costs down with an interest-only mortgage, emergency cover insurance, a good accountant and a professional broker, you should be able to stay one step ahead of the game.