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Rental properties as means by which to earn an additional income are becoming increasingly popular, with the number of landlords in the UK rising to 1.75 million. Figures from HM Revenue & Customs show that there was a seven per cent increase in the number of landlords in the tax year 2013/14. The figure expected to have risen still further in the following tax year, taking into account the surge in buy-to-let investments before the tax changes came into effect this April.

Figures from estate agent Ludlowthompson, which analysed the HMRC data, suggest that more people are investing in rental properties as a way of generating a decent return on capital. Landlords had a combined net income of £14.2 billion from rental properties during the year, which was an increase of £1.1bn on the previous year.

Cheap mortgages, rising rents and increases in values have made property an attractive investment. The low interest in savings accounts and the risk of investing in stocks and shares have further driven demand for buy-to-lets.

So what are the best investment properties?

One-bedroom flats are likely to produce the best capital returns over the next year while two-bedroom flats enjoy the greatest yield, according to a survey of professional landlords by Amicus Property Finance.

About one in four landlords also felt that student accommodation in university towns and cities would offer strong capital gains, while 22 per cent were putting their trust in two-bed flats and 21 per cent felt that three-bed flats were a good option. Terraced houses were the fifth most popular option, with 19 per cent of landlords picking these properties. Maisonettes were out of favour with just three per cent of landlords predicting significant gains.

For the best rental yields, 28 per cent favoured two-bedroom flats while one in four opted for student accommodation. The next most popular choices were three-bedroom flats, one-bed flats and new-build properties. Bottom of the pile were houses on established estates.

So flats win over houses and maisonettes for the buy-to-let investment sector, it seems, in terms of both capital gains and rental yields.

Other than the type of property, location is always the key consideration. To maximise the value of the investment it is worthwhile looking for a promising or up-and-coming area which holds good potential for capital growth. It also needs to be in a strong rental catchment area, such as commuter towns with good public transport connections, schools and services; or any of the leading university towns.