With dropping home prices, a long term investment in real estate is looking pretty attractive. Whether you want to buy rental property outright, or renting is your plan B when your house doesn't sell, the most important thing you need to think about before you become a landlord or landlady is risk. The concept of risk in renting property tends to draw blank stares. After all, you have insurance on the property. You have a lease. What's the problem?

Understanding the answer to that requires a shift in your thinking. Most of us are renters at some point in our lives, whether in college, or while we are working that first job, saving up for a down payment, or in a transitional period in life. When you are renting, it seems like the landlord has all of the power. He chooses the the paint color on the inside of the house, what trees or shrubs you have in your yard, when your lawn gets mowed or your driveway cleared of snow. When your toilet breaks or your roof leaks, a repairman shows up, paid for by your landlord. When your rent is late, even a teeny tiny bit, that landlord is on your butt like white on rice. And when your lease is up for renewal, the rent goes up as inexorably as the rising sun.

And yet, when you trade places, and suddenly you are the landlord, as in a horror movie, you realize the tenant has all of the power. The tenant physically occupies your property. They can damage the structure or the appliances. Their pets pee on the carpet and chew up the woodwork. If they sell drugs, the police could literally seize your property. And the tenant controls that ultimate item of power, the rent check, which you desperately need--on time--in order to pay the mortgage each month. In fact, unless you are very lucky, the rent check probably won't cover the mortgage. Worst of all, if your tenant suddenly turns deadbeat, it can take months to evict them from the house, and all the while that mortgage payment has to be made, on time, every month, or you could lose the house to foreclosure. A myriad of laws and advocacy organizations protect the rights of the tenant, but as a landlord or landlady, you are always the bad guy, and if things get ugly, you will be pretty much on your own.

Are you scared yet? You should be. If you decide to go ahead and become a landlord or landlady for the first time, here are some tips for controlling that risk.

1. Screen your tenants. You will be tempted to rent to the first non-scary person or couple that puts in an application, but be choosy. Make sure that you do a credit check and check references on your prospective tenant. If those thing don't check out, don't rent to them! This is no time to be "nice." Don't rent to the person who deserves the house. Rent to the person who can pay for it. Find out what their income is and do the math.

2. Don't rent to section eight tenants. This is not a rule for life, just for your first experience as a landlord. When you have dozens of units, and enough cash reserves to carry you through some unexpected vacancies, then you have my blessing to take on section eight tenants. In fact, please do. But your first time out, you should turn down section eight applications.

3. Get help from a lawyer. Spend a few bucks to get your lease written up by a well-qualified attorney.

4. Avoid situations that seem strange or "funny" to you. Use your spidey sense to weed out applications that seem weird, strange, off, or otherwise not right.

5. Obey the fair housing laws. You are not allowed to discriminate on the basis of race, color, national origin, religion, sex, familial status or handicap. Obey this law scrupulously to reduce your legal risk.

6. Have proper insurance. Don't skimp on insurance for this very valuable asset.

7. Rent to people with pets. Although pets can do a lot of damage to the house, that effect is balanced by the fact that pet owners tend toward "family" values. If you have a Mom, a Dad, a kid, and a dog, you're probably going to get a rent check every month. As a bonus, your pool of applicants will be larger, because most landlords don't allow pets. Think of it this way. Would you rather replace a carpet for $500, or evict someone who was growing pot in the basement? If you've got an applicant with good references, good credit, a steady job, a family, and a pet, take it as a good sign. Obviously, it goes without saying that you should not rent to shady-looking people just because they have pets.

8. Maintain good relations with your tenants. Respect their space. Respond promptly to maintenance calls. Be understanding of the occasional rent check that arrives late. Don't sweat the small stuff, because a bad tenant is so much worse than you can possibly imagine. Remember that they are more afraid of you than you are of them.