The amateur buy-to-let investor has had his day. Deterred by falling property prices and hampered by a lack of mortgage credit as banks tighten their lending criteria, small players who want to buy one or two homes to supplement their income or bolster their pension are fast disappearing.

At the same time, however, professional investors with large property portfolios are cleaning up; many are sitting on substantial sums of equity built up throughout the housing boom. Unlike new investors, they can afford to meet lenders' more stringent requirements for larger deposits. Figures from Hometrack, the property data company, indicate that 82 per cent of rented property is in the hands of professional or semi-professional landlords who own at least ten homes. For these people, a weak housing market represents an opportunity to find a bargain property and take advantage of rents that have risen by 12 per cent over the past six months, according to Paragon Mortgages. Investors know that fewer buyers in the market equates to a greater demand for rental homes.

Heenal Lakhani, 27, managing director of Fenwold Properties, is a typical example of a professional investor who gave up his day job to focus on property full-time. He has been running his property investment company in London for more than two years since leaving his job in the City, and is among those searching for a good deal. Part of his approach is to target properties that have been repossessed, refurbish them and sell at a profit - as he demonstrated in Bricks and Mortar in February. Since the article was published, Lakhani has experienced a surge in competition from other investors. “I haven't managed to buy a single ‘repo' since then. I've lost out on some deals where other investors outbid me,” he says. “There are lots of serious buyers out there who really want to reap the benefit of rising rents.”

He adds: “The savvy investors know that this is a good time to buy. Lenders may be asking for deposits of up to 25 per cent. In London there are lots of investors with cash who are happy to put down that deposit. They will do the maths and work out the yield. If the property is at the right price, they will buy. Leaving the money in the bank will not earn you that much interest.”

Paying about 5 per cent below the asking price has become the norm but the investors getting the very best deals are those who are buying in bulk. Matt Tack, director of Hampton's Asset and Investment Management, an advisory service to property investors who buy anything from 20 to 100 properties in a single go, says that some investors are managing to buy properties at 20 per cent below their market value. He says: “It can be anything from traditional Edwardian and Victorian buildings in Chelsea to new-builds in Stratford. There are a lot of properties on the market which would have been snapped up within days last year but are now taking longer to sell. These are now being bought quite cheaply by professional investors who intend to hold for three to seven years.”

These investors will do well out of rents. Falling property prices and the tightening credit crunch means that fewer people are willing or able to buy their own homes and therefore end up renting. The average rental home generates more than £1,000 a month, according to Paragon, and that figure could rise even further.

Capital Economics, the analyst group, predicts that although property values will drop by 8 per cent this year and by 10 per cent the next, rent will grow by 4.6 per cent in 2008 and by 5.8 per cent in 2009. According to its forecasts, rental growth will outstrip growth in average earnings over the next two years.

In the long term, the Association of Residential Letting Agents (ARLA) forecasts that demand for rental homes is set to grow by between 20,000 and 30,000 a year over the next decade because of the rise in the number of divorcees and immigrants, as well as increasing job mobility.

John Heron, Paragon's director of mortgages, says: “The professional end of the market remains committed to buy-to-let over the long term. They typically hold their investments for a decade or more.” Heron adds that professional investors are not under pressure from the credit crunch because the amounts many need to borrow to fund future purchases are modest compared with the size of their overall portfolio. “They borrow an average of less than 40 per cent of the value of their portfolios,” he says.

Property investors today are a different breed to those who dreamt of instant riches during the height of the housing boom. Back then players such as Inside Track, the property investment company that recently went into administration, could easily charge the uninitiated £695 for seminars on how to make money out of bricks and mortar. Novices were taught how they could make money by buying new-build property “off-plan” before a single brick was laid and selling it on at a profit before the building was completed. Dabblers and professionals alike made thousands of pounds from the practice, known as “flipping”, during the boom years. Even at the start of this year, many were still hoping to turn quick profits by flipping properties to other investors.

Few are expecting to make quick money now. The risks are too great and the stakes are too high. Investors might be able to buy cheaply off-plan but will have trouble flipping the property now that smaller investors are not buying.

According to Tack, today's investors take great pains to avoid costly mistakes. “Property investment has become much more professional and much more technical. At the moment you could buy a property and instantly go into negative equity if you got it wrong. But it is quite an exciting time. This year will be very interesting.”

Fact File:

There are about 500,000 buy-to-let investors in Britain. They own property worth more than £120 billion (ARLA).

Only 2 per cent of landlords are planning to sell up, according to research by the Royal Institution of Chartered Surveyors.

Average rents have risen by 4 per cent over the past three months and by 12 per cent over six months to reach a new record of £1,000 a month. The annual rent is now £12,041 (Paragon Mortgages).

In April 2007, there were 2,990 types of buy-to-let mortgages available. Today there are fewer than 600.

HBOS group lenders have cut their lending on new-build flats: Bank of Scotland, BM Solutions and The Mortgage Business reduced the maximum loan-to-value ratio from 85 per cent to 75 per cent, and discontinued many fixed-rate and tracker deals.

Nationwide, Abbey and Chelsea Building Society have reduced their lending on new-build flats.

Times recommends

• Second homes: credit crunch casualty or money-spinner?
• How I built my own sliding house
• Top 10 incentives for house buyers