Buy-to-let investors made average returns of more than 16 per cent during 2007 on the back of rising property prices and increasing rents.
The average landlord made returns of 16.3 per cent on their property during the year, excluding the cost of fees and mortgage interest, up from returns of 13.5 per cent in 2006, according to Birmingham Midshires.
The rise was partly driven by a 10.7 per cent jump in house prices during the year, leaving the average investment property costing £154,795.
But the group said most of the gains were seen during the first half of 2007, with the market much more subdued during the final six months of the year as a result of the five interest rate rises over the previous 12 months.
Property values rose by just 1.6 per cent during the final three months of the year, and the slowdown is expected to continue into 2008, meaning total returns for investment landlords are not expected to be as strong this year as in the recent past.
Rents also rose during 2007, increasing by just over 13 per cent to average £698 a month.
Investors in Northern Ireland saw the strongest gains, making average returns of 44 per cent in 2007 on the back of soaring property prices in the region. The price of investment properties in Northern Ireland increased by around 39 per cent during the year, dwarfing the gains made in Greater London, which saw the second highest growth of 15.8 per cent.
The South West and the South East were the only other regions to see double digit growth, while in the East Midlands the price of investment property crept ahead by just 5.7 per cent. People looking to rent a home in Scotland saw the biggest jump in costs during the year, with rents there soaring by nearly 23 per cent, while there were also strong rises in the North at 18.2 per cent and in Greater London at 15.4 per cent.
But the East Midlands also recorded the lowest rental growth, with average rents rising by only 8.9 per cent last year, making it one of only two regions that did not see double digit increases.
Despite this, the North is still the cheapest place to rent a property at an average of just £494 a month - the only region in the UK where average monthly rents are below £500.
Overall, property investors in Northern Ireland made the biggest returns during the year at an average of 44 per cent before fees and mortgage costs, followed by investors in Greater London at 21 per cent and those in the South East and South West at just under 16 per cent each.
But even in the East Midlands, where gains were lowest, investors made a return of 11 per cent.
Tim Hague, managing director of Birmingham Midshires Mortgages, said: "The fundamentals underpinning the buy-to-let sector are sound.
"They include strong demand from higher immigration levels and housing affordability concerns for first-time buyers.
"However, we expect house price growth to be more subdued in 2008."