1. Be very clear about your goals and objectives.
   1. While there are both tax and revenue advantages to owning rental property, you should have a firm grasp on your goals and objectives with them.  It is essential that you learn what costs are associated with ownership, including the hidden ones.  Generally speaking, investment properties should be viewed in terms of their longer term return.
2. Compare property values and rents.
   1. Financial statistics only go so far; the best measure of a property's market value is often the sale prices of nearby properties. The same holds true for area rents.  In other words, know your market, know your target audience.
3. Monitor tax laws.
   1. Don't base your tax investment on current tax laws. The tax code is constantly changing, and a good investment is a good investment regardless of the tax code. The right property with the right financing is what you should look for as an investor.  That said, the savvy investor knows that they may need to accommodate changes in the laws.
4. Specialize in something you know.
   1. Start in a market segment you know. Whether you focus on fixer-uppers, foreclosures, duplexes, low-down payment properties, small apartment buildings, you'll benefit from experience by specializing in one aspect of investment real estate properties.
5. Know the costs going in.
   1. Know the financial statements inside out. What are operating expenses? What are loan payments? Vacancy costs? Taxes? What does the cash flow statement look like? These are key issues that must be addressed before making a solid investment.
   2. Understand what improvements you may have to make and at what estimated cost.
   3. If you plan to convert a property into additional units, be aware that there can be hidden costs associated with such construction, including potential issues with strained plumbing and other infrastructure systems.
6. Know where your tenants are coming from.
   1. If the property you are evaluating has existing tenants, then find out what the current status is for each.  How long is each lease?  How soon do they come up for renewal? Have there been any rent increases and when?
      1. If the last rent increase was recent, your tenants may be considering a move. If tenants have a short-term lease, they may be living there because they have low rents; they may be under rent control .
   2. If you do purchase a rented property, remember to collect the tenants' security deposits at closing. 
   3. If you are considering a vacant property, research what properties like yours are renting for and/or what comparable property rents are being advertised.  Know how much comparable competition you are going to have.
   4. Check out the neighborhood.  Will the tenants have easy access to shopping and services?  What entertainment and/or sports related activities are nearby?  If your property comes without laundry facilities, is a laundromat accessible?  The old adage of "location, location, location" holds true with rental properties.  The bottom line is you must assume there is competition and look for ways to leverage against it.
7. Assess the tax situation.
   1. Taxes are an integral part of successful real estate investing, and they often make the difference between a positive cash flow and a negative one. Know the tax situation, and see how it can be manipulated to your advantage. It may be a good idea to consult a tax adviser.
8. Investigate insurance coverage.
   1. Gain knowledge about what kind of insurance is needed for your purpose. If seller's coverage is based on lower-than-current replacement value, your insurance cost may increase when you pay a higher purchase price.
   2. Work with an agent who has a track record with insurance for investment properties.
9. Confirm utility costs.
   1. Ask the local utilities to verify recent utility expenses, especially if any of these costs are included in your tenants' rents.
10. Consult your accountant.
    1. Taxation is a key element of successful real estate investing, so be sure to find an accountant who is well-versed with the constantly evolving tax code.
11. Inspect!
    1. Make sure that you always perform a thorough inspection of the property before buying it. Never, ever buy any property without at least examining the site. In some cases, hiring professional inspectors to examine the structural , electrical and plumbing systems may be a wise investment.
    2. If you do need to invest in repairs or improvements, have a plan and budget in place to execute them.  Monitor the budget closely. Prioritize the activities in order to preserve your cash flow and minimize impact to the property's rentability.
12. Protect your investment with proper management.
    1. Evaluate what it will take for ongoing management of your investment.  Avoid extremely costly repairs with simple maintenance of the infrastructure, especially plumbing. Learn how much time and effort it will take to do it and then determine if it will be more cost-effective to outsource it to a reputable property management firm.  You may well be able to save money as well as time, while protecting the equity of your property.

Like any investment, it's wise to know what your goals and objectives are and do your homework.  That way you get the most out of your efforts and optimize the return.

Happy Investing from UPM!