[Smokin Gator]

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.