Distressed properties or foreclosure properties are ideal candidates for investments. Why? The ability to buy the property at 30% to 60% below the original sales price ensures a positive cash flow from rental income and future appreciation.

What kind of properties should you consider for investment? While an executive home may be offered at a bargain price at foreclosure, how many people can afford $5,000 a month to rent a $500,000 home? Not many, and those who can would probably buy it themselves. The 100 unit apartment complex is a large jump to take for a inexperienced landlord. It will require more money, time and effort to secure the deal and manage the property. This leaves us with the multifamily and single family homes. This is the ideal category for the first time investor or the experienced investor to add to their portfolio. This is the "bread and butter" category. The home a new family can afford to rent.

While the steps for buying foreclosed properties as investments are the same as the steps to buying foreclosures, there are some additional considerations. The location you target should have a small supply of rentals and show signs of increased demand and economic growth. Before targeting the area, investigate the available apartments or homes as a prospective tenant. Use the newspapers and real estate brokers to determine the prevailing rents and the amenities included. Find out the demand for rentals and the vacancy rates. Find out if there are seasonal variations. Determine if you can purchase a foreclosure property to rent and be competitive with other rentals in the area.

While you should be comfortable with the area you have selected, evaluate the location from the perspective of your typical renter. You may enjoy the peace and quiet of a secluded home in the country but a young family may desire proximity to work, daycare, shopping, recreation and entertainment.

Before you jump in consider your own temperament! Are you really ready for T&T (toilets and tenants)? Are you willing to have the phone ring at 3:00 am with a tenant screaming about a toilet overflowing? Are you willing to take the time to properly screen your tenants, manage the property and perform repairs? Do you have the skills to make minor repairs yourself or will you hire professionals? Who will collect the rent? Are you willing to take delinquent tenants to court? Do you know the tenant and landlord code so you can take the necessary steps to protect your interests? The laws are written to protect the tenant, sometimes at the landlords expense.

THE LANDLORD TENANT LAW APPLIES TO MOST SMALL INVESTORS

The Rent Security Deposit Act specifies you keep a tenants deposit (no more then 1.5 times the monthly rent) in an interest bearing account. The landlord must provide the tenant, in writing within 30 days, the name and address of the bank where the deposit is held. If the landlord does not provide this notice or does not deposit the funds in the institution specified, the landlord loses the right to hold the deposit and the tenant can use the deposit to pay the rent. The landlord can not ask for an additional deposit and will not be protected for damage or repairs.

New Jersey's Landlord Registration Act states you must register in the town where the property is located. You must provide your name and address and the telephone number of someone who can be reached at anytime and is responsible for emergency repairs and receiving complaints from tenants. You must display this information at the property and provide the information in writing to each tenant. If you do not comply with this law, the court can refuse to enter a judgment for possession against a tenant you take to court for eviction or non-payment of rent.

The landlord must provide safe housing by providing locks on doors and windows. Without adequate locks, the landlord can be held responsible for any injuries or losses suffered as a result of a break-in. The law requires the landlord to make the necessary improvements to make the apartments insurable.

As a landlord, you must make sure every tenant respects other tenants rights. If a tenant plays laud music and other tenants complain, the landlord is responsible for making the tenant stop playing the music laud.

Approximately 160 municipalities enforce rent controls regarding rental amounts. Elsewhere, an enforceable rent increase notice must be in proper legal form. It must be provided 30 days before the increase takes effect. The amount must not be unconscionable or effective prior to the end of the current lease. A rent increase as small as 5% can be unconscionable when a building is in need of repair. A rent increase can be challenged, if the tenant believes it is retaliatory for complaining to a building inspector or belonging to a tenant association etc.

There are 16 grounds for eviction in New Jersey. The landlord must provide specifically worded notices before exercising his right to evict a tenant. For example, a notice to cease must tell the tenant the specific action to stop (i.e. late rent payments, disorderly conduct, violating rules and lease agreements etc.) and if the action stops eviction will be avoided. If the tenant does not stop the action, the notice to quit must follow the notice to cease. The behavior complained about must be the same in both letters. Depending on the reason cited, from 3 days to 18 months notice must be included in the notice to quit before the landlord can proceed with eviction. A landlord who files a complaint with the court before the legally mandated notice date can have the complaint dismissed. After the judge agrees to eviction, a tenant can request a Hardship Stay, for up to 6 months.

The Just Cause for Eviction Act and other landlord/tenant laws, apply to single family homes, apartments and mobile homes. They DO NOT apply to houses with three or fewer apartments where the owner lives in one of the apartments.

While there are many rewards to being a landlord, it is not "easy money". Being a good landlord means providing a safe and enjoyable environment where tenants will respect and care for the property.