I run a rental management business and my number one piece of advice is to perform proper background checks on all applicants. This includes criminal history, credit history, landlord referrals and rental history. Not everyone I rent to is a perfect candidate but you can make a more informed decision. There are a good number of companies that perform this service and the cost is generally $15-35 per report and is worth every penny. If you want to save the cost to yourself, charge an application fee.

Next make sure you understand landlord/tenant law and equal housing laws. Follow them to the letter and you will avoid most legal issues.

Check with your local chapter of NARPM and see if they allow non members to attend the seminars and classes. They are a wealth of knowledge for property managers and landlords.

Last, learn to be fair but firm. This may sound like an easy thing but I have rescued so many landlords that just wouldn't stand up to their tenants. You have a signed agreement with the tenant, make them follow it.

If you want to start sooner check out Homepath.com for a list of Fannie Mae foreclosures in your area. You can then find a lender that participates in Homepath loans and they even have options for investment borrowers and renovation loans.

Be leery of condo purchases. Condos often have association fees which can be as much or more than your mortgage payment. This can seriously eat away at your profits. I am not saying that all condos are bad investments but its something to watch out for, same goes with homes that have HOA fees. On that note, make sure that if purchasing in a subdivision that the HOA allows rentals.
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Moses is right, and Section 8 does not only apply to bad areas. In most cases it is a voucher program where the tenant asks for assistance and is allowed to find a place they want to rent. Once the tenant finds a place and a landlord that is willing, the govt. agency will determine if the property is priced fairly compared to other rentals in the area and perform an inspection to make sure it is up to their qualifying code (which is not that stringent). Once the tenant is in they have to pay a portion of the rent and the government pays a portion. Section 8 tenants are, most cases, no harder to evict than non assisted tenants and as a landlord you have part of the rent guaranteed. The amount of assistance given is normally based on family size and income level.
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Easiest for rent, most issues. :-)
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At least here you are allowed to screen Section 8 just like a regular tenant. If the person has a history of abandoning leases or a criminal history you are not obligated to rent to them. Plus people are in the housing program, not properties so if Section 8 doesn't work you can always return to non assisted tenants. I've had more issues with college students than with Section 8.
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Benefits of college student are higher rents and hight turnover. Higher turnover allows for more dramatic rent increases, but could also mean more prep work to unit each time it is re-rented and possible rental commissions.

College students rents around Boston have always been high and have been the best investment vs. Section 8. Boston is unique though and this opposite would be true in the greater metro-Boston area.

College students can rent a 5+ bedroom house, where most families can't afford such a property or wouldn't want to live in a student neighborhood.

College students tend to have a parental co-signer and are willing to pay last month's rent and a security deposit.
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In PA, Section 8 tenants get one shot. If they fail their rent or are evicted for any cause, they lose their eligibility and can never get it again. In a way, it makes it seem like it'd be safe to rent to them because the tenants have something to lose.
It all sounds great, but there's one string...
If you rent to Section 8 tenants you have to agree to use a Section 8 lease. That's not a big deal if you're not a dick like me. I absolutely refused to use their lease, or be dictated the rules by which I'd rent my properties.
My lease was designed and modified to protect me and my interests. Section 8's lease was not, and didn't need to be because they had nothing to lose.

In my experience, background checks were a 100% waste of time, effort and money. In Albert's business they'd be necessary, it goes to culpability. The best way to root out a good tenant is when they have good rental references and you can talk to their prior landlords. Most won't have any because they're lying, but when they do, it's very important to verify that the references are real and speak to them at length.
Talking to brothers and sisters helps. They'll generally be honest enough for you to read between the lines.
If you're still not satisfied, and I never was, I'd swing by the place they were currently living and do a quick drop-in. They never imagine you'd be bold enough to do that. One 10 minute visit will show what kind of housekeepers they are, and verify most of the things they told you. 8 times out of 10 you'll find out the applicants lied about everything they spoke to you.
It's a lot of work finding good tenants, and when you get one, it's very important to bust your ass to keep them. Good tenants are what makes the wheels go. Lots of times I'd be too busy to do my due diligence screening renters and it'd bite me in the ass.
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The company that does my reports goes as far as to find prior landlords and references. They will also handle my evictions. I check credit, work history, criminal, and landlord references as well as rental and eviction history.

If I was doing this for myself exclusively, I love the idea of paying them a visit in their current residence :-)

I have done some research and it appears the rules vary state to state on Section 8 even though its primarily federal funding. In GA we don't seem to have the issues you mention but I would not use any other lease than my own either!
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There is lots of good info in this thread. I'm looking to purchase a new house in the next couple of years, and am planning on keeping my current house as a rental although we'll see what happens at that point.
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My family has been buying residential rental property since 1984. I manage that business and have rentals of my own. From reading this thread you can tell there are several approaches to it, but to me knowing the market you want to be in and focusing on that is really important.

At one time we were more into the multi-unit buildings. As that market evolved in our area, we started moving more into single family homes. With the foreclosure situation in Florida in the last few years we have really been able to capitalize on the market because we had plenty of cash on hand and liquidated a large multi-unit building to use those funds as well.

We also focused buying in one large residential area that we knew well and it is close to where I live. It really makes the day to day operation much more manageable. We are also very familiar with the pricing in that area, so when something comes on the market we are able to move quickly and with confidence.

Our goal with any property is to have it pay for itself in no more than ten years, preferably eight, including insurance and property taxes. To do that we have used a rule of thumb getting income of 1/10 of the purchase price per month in rent. In other words, if we pay $80,000 for a house we want to know we can get $800 per month in rent. That has served us well and the last few years we have been able to better than ratio consistently with our purchases.

Bottom line for me is know your market, have a solid plan for purchases, screen your tenants well, be very upfront with what you expect, and be fair.
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