• Mistake 2: Overlooking key costs.

Knowing the potential rent isn't enough. Before you buy a property, you should also factor in closing costs of 3% to 6%, the costs to fix up the place and maintain it, and your holding costs. Then add the profit you expect to make (and more closing costs, if you intend to turn around and sell it). Only then can you figure out what you can afford to pay.

• Mistake 3: Forgetting that time is money.

In real estate, "time is your biggest enemy," says David Hicks, co-president of HomeVestors of America, a franchiser whose motto is "We Buy Ugly Houses." You lose money when your property is empty, whether you are painting it or between tenants. You also lose if you buy in the fall and can't replace the roof until spring. You may be better off accepting a lower rent than waiting for a higher-paying tenant.

• Mistake 4: Assuming you will sit back and watch the rent roll in.

"When you become a landlord, you become a rent collector," says Mark Kreditor of Get There First Realty, which manages 1,600 rentals in the Dallas-Fort Worth area.

Just like homeowners who can't pay the mortgage, tenants lose their jobs and stop paying the rent. Evicting them can take several weeks, and some steal appliances or other property. Mr. Kreditor says that once or twice a month, a tenant removes a home's copper tubing on the way out the door to sell the copper for its meltdown value.

You will need to screen prospective tenants carefully—or pay someone to do it for you.