Last week’s answer

I was born in 1905 as the Seattle Car Manufacturing Co., cranking out railway and logging equipment. I later became the Pacific Car and Foundry Co. before tweaking that to arrive at my current name. I built Sherman tanks in World War II and made steel for Seattle’s Space Needle. Today, based in Bellevue, Wash., I’m the world’s second-largest manufacturer of big-rig trucks. My light-, medium- and heavy-duty trucks sport brand names such as Kenworth, Peterbilt, DAF and Foden. I also provide financial services, distribute truck parts, and make winches under the Braden, Gearmatic and Carco names. Who am I? (Answer: PACCAR)

So you want to be a landlord?

Owning rental property isn’t as simple as it might seem. Consider the following suggestions before buying any property to rent.

Buy carefully. You may be called to the neighborhood in the middle of the night to tend to some emergency, so make sure you’re comfortable there. If you see a lot of For Sale or For Rent signs, that’s not a good sign.

Expect occasional sizable outlays of money, such as when a roof develops a major problem. Expect routine cash outlays, too. You should paint apartments (or offices) between tenants and every few years for remaining tenants. Rugs will need to be replaced, locks changed, repairs and upgrades made. To attract and keep tenants, your property should look clean and decent.

If you have a good tenant who takes care of the property and pays on time, you may not want to raise the rent too often. A reliable $800 per month can be better than a more iffy $1,100 per month.

Don’t let tenants fall more than a few weeks behind in the rent, because they may never be able to catch up. If there are problems, negotiate, perhaps arranging for the rent to be paid weekly. Consider collecting the rent in person, so you can check up on the property’s condition. (But be careful — you might become a robbery target if you’re known to be making the rounds at the same time each month, collecting cash. Perhaps don’t go alone.)

Expect to learn the rules and laws governing rental properties, so you know how to deal with various issues, such as when and how to evict. Make sure you understand your insurance policy, and what it does and doesn’t cover.

Seek out and develop relationships with people who can help you, such as friendly, experienced landlords in the area and good professional service people (carpenters, electricians, plumbers, contractors, roofers, etc.). They may bail you out on occasion, so treat them well.

Learn more. One useful book is “The Complete Idiot’s Guide to Being a Smart Landlord,” by Brian F. Edwards, Casey Edwards and Susannah Craig (Alpha Books, $19).

Stocks as gifts

How can I buy small amounts of stock to give as gifts to my grandchildren? — R.G., Miami

Consider opening a direct investment plan account with one or more companies. Often called “DRIPs” or DSPs, they permit you to bypass a broker when buying stock. Learn about them at www.moneypaper.com, www.netstockdirect.com and www.Fool.com/DripPort/WhatAreDrips.htm. Some newer (but often more expensive) options are companies specializing in gifts of stock, such as www.registerstock.com and www.oneshare.com.

Why do some stocks, such as Sun Microsystems and Lucent, have such high trading volume each day when their current value is so small? Who’s buying and selling so many shares of these “penny” stocks that you folks recommend staying away from? — Ken Krueger, East Hampton, Conn.

First off, both Sun and Lucent have market values near $20 billion, so they’re not exactly small companies and therefore aren’t classic penny stocks (which tend to trade for less than $5 per share).

When a stock trades at a very low price, investors sometimes think it’s a bargain, without realizing that a $2 stock can be wildly overvalued and a $500 stock a steal. So as some investors lose faith in these firms and sell their shares, others are attracted by the seemingly low price. Meanwhile, even some savvy investors might be buying, if their research suggests that these firms will turn around. The stock market thrives because there are almost always people willing to buy and sell, at various prices.

Also, the low price of the shares contributes to the high volume. A $1,000 investment in a $5 stock would create a volume of 200 shares trading hands. However, that same investment in a $50 stock would create volume of just 20 shares.

Don’t forget to sell

I turned $3,230 into $15,500 — and then $935. Here’s how: In 1999, I purchased 100 shares of Bluestone Software for around $31 each. When Bluestone shares hit $135, I told my broker to sell. He said that the shares would go to $150, though, and advised me to hang on. I did, and Bluestone did go to $150. I never sold it, though, instead holding on while it dropped all the way down to $15 and lower. Then Hewlett-Packard bought Bluestone, and I received 48 shares of Hewlett-Packard worth $1,768, which fell in value to $935 by late 2002. — T.L.K., via e-mail

The Fool Responds: When you buy a stock, it’s critical to have a firm idea of when and why you’ll sell. If you’ve made as much money as you expect to on it, sell. If the reasons you bought are no longer valid (perhaps the company has changed its focus or lost its competitive edge), sell. Hewlett-Packard shares have been faring well lately, though, having risen 32 percent in 2003.