It is going to be a great year for buy-to let landlords but choosing the right location will be the key to success. With significant regional variations in house prices, landlords must not be tempted to simply buy a property close to where they live for convenience.

Stagnant house prices and increasing demand from tenants could provide a good opportunity for landlords. Many potential first-time buyers are unable to get into the housing market, meaning demand for rented properties is high, so would-be landlords with plenty of capital have the chance to snap up a bargain.

Potential landlords need to understand the risks. The last housing boom saw more than a million people become landlords as they sought to cash in on rising prices. Many lost substantial sums when house prices slumped.

Bath and north-east Somerset have seen an increase of house prices of more than 8 per cent over the last 12 months, while west Devon, Chiltern, south Cambridge-shire and south Bucks saw increases of more than 5 per cent. London, Islington, Camden, Kensington and Chelsea have seen increases of more than 10 per cent, according to Savills/Land Registry figures.

Prices in some areas are close to 2007 peaks while others have fallen sharply.

Landlords need to focus on the regular income they receive from their property rather than the gains of house-price rises but if both benefits can be achieved by smart landlords who buy in the right areas, a real killing can be made.

House prices have now fallen five times in seven months, according to Nationwide Building Society. This, coupled with the uncertain economic outlook, will keep many buyers on the sidelines. These factors should make property increasingly attractive and could signal a move towards BTL by cash-rich investors.

However, I suspect regional variations will continue and there will still be some horror stories from landlords who put all their eggs in one basket and suffer from a depressed local property market. Professional landlords are increasingly spreading their risk and focusing on key areas that look promising in the medium term.

The availability of attractive BTL deals will play a key role in an investor’s decision as to whether to expand their portfolio, as will a potential increase in interest rates. My view is that interest rates will rise and it is a case of when, so investors need to factor this in.

Those brokers who have taken their businesses up market and focused on high net-worth investors are weathering the storm better. This is not surprising as the wealthier have a much higher pain threshold and can cope with a drop in income in percentage terms much better than an average earner.

Let’s not forget that house prices doubled over the last decade, even after taking recent falls and the illusory uplift of inflation into account, according to Halifax research. I dare say we will enjoy similar growth over the next 10 years. The key difference is that only braver investors will act on this likely outcome now.

Those investors with cash in the bank who can put down the necessary deposits should be reaching for their chequebooks - but only after they have done their geography homework.

Sally Laker is managing director of Mortgage Intelligence and Mortgage Next