First step is to read about other peoples' experience in this space by looking at the top rated real estate investment books on Amazon.
Second you will have to do the math to understand your budget, taking into account all your expenses such as mortgage, taxes, HOA fees, etc.
Then you need to allocate a vacancy rate (you won't always have it full) and you also need to think about how to keep a good maintenance budget because things will go wrong.
Quality of tenant is a huge issue so make sure you do background and credit checks as well as check references. There are management companies who can do all this for about 8% per month which might be worth it. Again, all this should go into your planning budget.
This is a complicated question. Depending on your objectives, type of investment, and financial situation will determine the best answer. Owning investment property is a great way to invest. I have owned several properties and I am currently the CEO of a residential property management firm with more than $400 million in assets under management. So I know a few things on the topic :-)
I would be more than happy to discuss your plans and help you better understand a potential investment.
Since this post we have more clarity on the direction of US interest rates.
All things equal this is a great environment to lock in a 30 year mortgage and become a landlord.
The lease is your bible and remember that when there's a dispute "tie goes to the runner," which essentially means that if you (as the LL) must clearly described every obligation and responsibility, seen and unforeseen. Sounds simple right? It's not and it's largely dependent upon the property type.
If this is a residential home in the suburbs the repairs and maintenance obligations/involvement/coats differ greatly when compared to a condo in the city for example.
After ten years in construction and ten years in property management I've been personally involved with a wide variety of property types. Every sound investment has a verified operating budget and 5 year cap ex budget. You get those two done correctly and you are definitely on the right track! If you have any follow up questions, shoot for 6am-7am eastern standard time.
Gregg M. Kennelly