Learn how to be a good landlord - that is, one with respectable tenants and who makes money

Being a landlord isn't always plain sailing, sadly, and you do need to do your research. But done properly, it remains a good form of investment for the more enterprising among us. We examine some of the different ways people make money out of buy to let, and some of the pit falls that are best avoided.

The first decision to make is what market you are appealing to. Is it young professional sharer, single City worker, family or student? Each has its own benefits: the young professional sharer is considered one of the safest markets, as they will not be able to afford their own property so will always be looking to rent. City workers on the other hand often can afford to pay premium rents, but you have to get the location and type of property right (think contemporary new build flat in Docklands). Renting to students can offer higher yields and properties that don't require so much upkeep (though expect lots of wear and tear) and family houses again can command high rent in the right sort of area, and by and large, make responsible longer-term tenants.

If it is the professional market you are targeting, the next decision to make is whether you are appealing to short lets (say, three months or less) or long-term (12 months). The advantage of short-term lets is you tend to attract premium rents. The disadvantage is you can expect periods where the property is un-tenanted and not bringing in any money (called void periods). With short-term lets, you will also pay your letting agent a higher fee: typically 15 - 22 per cent, compared with ten per cent for long-term lets. Location, for short-term lets, is even more important than with long-term: tenants are often bank or City workers, who may be in the area on business for a month. It's most likely that they will only want to live in central locations.

Dan McLeod, head of lettings and sales at Atkinson McLeod estate agency in London, recommends that, for first-time landlords, long-term is best. 'With short-term, it is risky, and very tied to how well the City and the banks are doing. The flats need to be fully-furnished, including pots, pans, linen - everything. This means you have to do a full inventory when the tenant arrives and leaves. There's a lot of repetitive administration costs.' He adds that he recommends the 'safe lets' in the early days. 'Sometimes boring is more stable.'

On the issue of inventories, it's best to pay for a professional inventory to be done. That way, if anything goes wrong, you're covered. A typical price for a professional inventory tends to be £100 on checking in (which the landlord usually pays for), and £80 on checking out (which the tenant pays for). Another good tip is to get tenants to sign the inventory the day they move in or out. Credit checks are also a sensible move - these cost around £20 - £30 per tenant - and this way you can get an idea of the tenant's history.

When you have found a tenant, they will need to sign a tenancy agreement. You can buy a tenancy agreement from a WH Smith, or use a letting agent who will handle the legal side of it. Most people recommend seeking professional advice (be it letting agent or a solicitor) on drafting the first tenancy agreement as a ready-made one can be too general. 'The Office of Fair Trading recently brought in stringent legislation on unfair terms of tenancy agreements,' says McLeod. 'If a small part of the agreement is regarded as an unfair term, then the entire document can be struck off, leaving you liable. It can be very costly for the uninitiated.'

Landlords also need to keep fully up-to-date with safety regulations. These includes gas safety (by law you have to check this annually), electrical items and furnishings. It isn't the law that you have to get the electrical items checked out, but if a tenant is hurt because of dodgy electrics then the landlord is responsible. As for furniture, check for the fire safety label; if it doesn't have one, get rid of it. For more information on safety regulations, landlords can check their local council, who can provide them with a checklist.

In Caroline Meyer's experience (she is the letting manger for Townends Estate Agents) disputes tend to happen at the end of the tenancy, and, she points out, breach of contract often happens if landlords don't sort out their tenants' problems quickly enough. 'Often, people are unrealistic about the amount of work that is involved in being a landlord. If you go on holiday, for example, and you don't leave a contact then if there's an emergency, your tenant may well call out an emergency plumber and you are liable for all costs. Plus you've got a disgruntled tenant.'

Should the worst happen and your disgruntled tenant turns into a non-paying nightmare tenant, then getting an eviction order from court can take a long time (generally six months), meaning six months of non-payment of rent, still paying the mortgage, and hefty legal expenses. The best way to avoid a total financial black hole is to insure yourself against this - companies such as Maras (www.maras.co.uk) can pay the missing rent, and legal costs. Policies start at £50 a year.