I have several properties which are rentals right now. We put 20% down on each of our properties, which are single-family homes. After expenses, we probably clear very little each month but the taxes, repairs, and insurance are paid for by the rental income, which is good. Therefore, our profits will be a combination of equity and appreciation. We bought older houses in established neighborhoods.
One is on a really big lot and our renters use it for football practice. Another is on a normal sized lot with excellent location. We found renters in each case that really liked the advantages of each property, so it's been a good match.
From experience, I would not put 20% of my own money down on a rental house again. I know I can get more properties with 10% down (have been approved already), and might even try for 5% down on my next one. I think the less money you can put down, the better. Let the renters pay as much as possible. You just have to make sure the property can hold the rent, insurance, taxes, and repair costs. It may take an extra year or so to pay off or result in higher monthly payment, but you can also accumulate more properties quicker by using less of your own money.
There are foreclosure sales at most county courhouses every month. Most of the sales want cash(cashier's check) within an hour or two of the bidding, so you have to have tons of capital up front. But, I have seen a guy buy a $110,000 house for mid 60's, renovate for a few thousand, then flip it quickly by underselling on the market and walk away with $30k profit in just over a month. That's eventually where I would like to be.
Screen the hell out of your tennants. There is nothing, I mean NOTHING worse than a bad tenant. They are hard to evict and can do a lot of damage in a short amount of time. Their deposit won't come close to covering the damages bad tenants can inflict. Do a credit check minimum, and a background check including rental history for good measure. We did this and have not had any problems so far (knock on wood). But we have seen our friends have some major tenant problems (like lighting the bathroom on fire) when their tenants weren't properly screened.
