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Buy-to-let rental returns have reached a two year high as a glut of UK renters combined with a lack of property allows landlords to push up rents and make some serious profits from their property investments.

According to LSL Property Services, rents increased by 0.3% in February 2010 to an average of £658 a month. Its index revealed that yields rose to an average 4.8%, and the total return from investing in buy-to-let over the last year including house price increases rose to 10.6% overall – the highest return recorded in the last two years.

But the data also showed the importance of picking the right property – while the average yield hit a two-year high, it found that the North is lagging far behind the South, with southern areas “storming ahead” as northern ones languished.

David Brown, commercial director of LSL, says: “The recovery in the South began much more quickly than in the North – the ripples from the housing downturn are still affecting the market in the North, whereas the South has been enjoying a new wave of optimism over the last year. We would expect returns to improve in the North as the recovery in the South spreads out, but it may lag behind for a few months yet.”

LSL predicts that new entrants to the buy-to-let market would make an annual return of 8.5%, or £14,000 on a typical property over the next 12 months.

That's a huge margin, and one that would be difficult to match if investing in the stock market. If you think you could make similar returns from a property investment, talk to a buy-to-let mortgage expert about getting hold of some credit to invest in something that could deliver some serious returns.

SOURCE: LSL, 16/03/10

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