Despite three interest rate rises since the start of the year and concerns that Britain’s rocketing house prices are stalling, there seems to be no shortage of people looking to make money out of the buy-to-let market. However, property investment is not a licence to print money and there are some important points to consider.

.Cover your back

The Residential Landlord Association recommends that you request details of prospective tenants’ previous three years’ residences along with their national insurance number, passport and last three bank statements. You should also use a tenant credit referencing service and take a four to six week deposit, refundable at the end of the tenancy (minus any justifiable deductions).

It is paramount that you and your tenants sign a tenancy agreement, available to download online or from high street stationers'. Draw up an inventory and take photos before they move in so as to identify any further damage at the end of the term.

Do you need a HMO license?

Beware if you have five or more tenants living in your property. In April 2006 mandatory licensing came into force across England to raise the standard of accommodation for those living in HMOs. The definition of a "house in multiple occupation" is one that has at least three tenants, comprising two or more households who share a kitchen and bathroom / toilet, but it is only landlords with five or more tenants who require a mandatory license.

Tenancy deposit schemes

According to research undertaken for Alliance and Leicester Mortgages, over half of all landlords (65%) keep some or all of their tenants' deposit when they move out for a variety of reasons, leading to arguments and sometimes even legal action.

In April the government introduced a new tenancy deposit protection scheme (for rent up to £25,000 pa) to help avoid and resolve such disputes. All landlords in England and Wales must join one of the schemes nominated by the government.

There are two types: an insurance-based scheme, allowing the landlord to retain the deposit while paying a premium to an insurer, and a custodial scheme, where the landlord pays the deposit into the scheme. In both instances, the landlord has 14 days to give the tenant details of the scheme selected and how to apply for the release of the deposit.

How do you evict a tenant?

Legally, you cannot evict a tenant yourself. You can apply to the county court if your tenant has missed two months’ or eight weeks’ rent, or if they are causing a nuisance to local residents. In certain cases, and provided you have the all-important tenancy agreement, you can use an accelerated possession procedure, avoiding a court hearing.

Tax liability

Finally, don’t forget that you will be liable to pay tax on your gross income from rents. You will be able to deduct from them your day-to-day running expenses. For further details, contact your tax office.