Ah what a mixed bag of nuts these two are! Each have their own headaches that I will ty to touch on here.
Investment properties - While the foreclosure market presents unheard of oppurtunities in this area, there are some potholes to look for.
Remember with a foreclosure you have to take into account the mindset of the resident. If they did not have money for mortgage the last year, then what are the chances they spent any money on the upkeep of the home? You can get into serious maintenance issues (take it from a former Chief Engineer for Marriott) that can eat up your profit margin!
I would not even consider investment properties if I didnt have A) the knowledge to effect all repairs myself, or B) had someone I trusted implicitely that had the knowledge. Besides the money saved in labor, when you hit an impass you must be knowledgable or get taken advantage of by vendors. This also eats up your profit margin.
Rentals - The biggest headaches for rentors is the upkeep of the property. I have seen a lot of homes trashed by tenants that made a profitable rental into a money pit! Remember you never know what the tenant will be like so it is important to be able to monitor the property. I am revamping a house now to sell that is trashed. The owner wants out. He is an absentee (out-of-town) rentor and was unable to monitor the home. This will cost him about 10-20k. BE CAREFUL!