SO, YOU WANT to become a property tycoon. You’ve got the cash but lack the know-how. Here, then, is how you go about it.

First, every successful investor craves the best possible return from property with the lowest possible risk. The best way to do this is to remain dispassionate about the properties you buy and the tenants you put in them.

Your aim should be to find a combination of property and tenant that achieves your investment objective.

My firm decided that London was the best place to invest because property prices are likely to increase more there in the medium to long term. But our strategy applies equally in other less expensive towns and cities.

Second, find property that will appeal to a specific market – for example, graduates, because this is a large, predictable and stable rental market. London has more graduates than Manchester, Birmingham, Leeds, Glasgow, Edinburgh and Cardiff put together, which was another reason why we chose it.

Three or four-bedroom properties that can be shared, in areas that are likely to improve over time, make good investments. These properties need to be as near to the centre of town as possible and close to public transport to appeal to tenants.

London has thousands of Victorian terraced houses, many of which have three bedrooms. This makes them ideal for renting to sharers — and selling one day to young families. This gives the investor the best of both worlds, because house prices go up more than flat prices and sharers give better rental income than a family.

Developers are building thousands of one or two-bedroom luxury apartments, but they are not building small family houses that young families can afford. Hence these properties are likely to increase in value because of their relative scarcity.

When buying an investment property you need to think about who you will eventually sell it to. Property that appeals to owner-occupiers makes the best investment, because they buy the vast majority of all private property.

This strategy has given us excellent results for the last four years. When evaluating whether to invest in a property, you should calculate the gross yield — the percentage of the cost price represented by the probable annual rent.

Four years ago 9 per cent was considered a normal gross yield; now you should aim for about 6.75 per cent, which is still considerably above average for the London market. This reduction in yield reflects the increase in value of property in London and the pressure on rents as more investors enter the market.

Over this period there has been a switch in the balance of power from landlords to tenants. Tenants are no longer prepared to accept poor quality properties in poor locations. Rents on properties that are ideal for tenants — good accommodation in good condition in a good location — have remained relatively robust. Rents on properties that require some form of compromise from the tenants, such as a single bedroom, or a long walk to the Tube, have fallen.

Investing in property adds balance and reduces risk to an investment portfolio. If one takes a long-term view, capital invested in property should be secure. If one invests in property for the right reasons, rather than to make a quick buck, property remains an attractive investment.

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