While helping restring some crawl space electrical wire-later found strung in closet for hangers-Josh found a rusted out .32 caliber handgun. Somehow tenants had managed to pry bricks out of chimney, which Ben needed to replace in order to meet code. Apparently someone had driven an M1A1 Abrams up driveway; there was no other way to explain huge cracks in a driveway that had remained perfect for 20 years.

What can we learn from this horrific, yet unfortunately true story?

Rule #1

Location, Location, Location. Ok, so this might seem a little cliché, but it's a fact that location of your investment property will determine kinds of tenants you will attract, and how much rent you can fairly charge. Remember, at some point in time in future it may become necessary for you and your family to live there; what kind of neighborhood do you want to be in?

Rule #2

Don't go overboard when you're fixing up an investment property. You ought to expect reasonable wear and tear. Keep in mind that 'reasonable wear and tear' means something entirely different to a person whose renting than it does to an owner. And for goodness sake forget the, "We are Family" hand towels!

Rule #3

Know how to make basic repairs. Luckily for Ben and sons they had quite a bit of experience in various construction trades. Otherwise they may have lost even more money than they did through hiring out help. Knowing how to fix electrical wiring, repair drains, and replace windows will save you quite a bit of money down road.

Rule #4

Screen your tenants as if they were moving in to live with you. This may be most important step to avoid becoming a slumlord. Ask for and check references. Call previous landlords and ask questions like, "Did they pay rent on time? How was condition of house/apartment when they left? Did they ever disturb neighbors with loud music or yelling matches? How often would you have to make special trips for untimely repairs?" Being as informed as possible about who you rent to will make a huge difference in profitability of your investment property.

Rule #5

Know your rights as a landlord. Be familiar with eviction process in order to avoid long, drawn out disputes with tenants. Most states and counties provide online information about tenant and landlord rights.

Don't repeat mistakes made by Ben and his sons. Granted, getting into investment property business takes hard work and you'll have to put up with things you normally wouldn't put up with. At same time there are steps you can take to limit your liability while preventing yourself from becoming a 'slumlord'.

In next portion of this two-part article we will be discussing some of financial aspects you should be familiar with in order to find best deal possible on your first investment property.

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