NEW YORK (MONEY Magazine) - The bird's-eye view of metro Atlanta tells you what you need to know about local real estate: Houses are big and there's plenty of raw land.

Throughout the South, easy land combined with easy terms and a growing population to lift prices modestly and fuel demand for ever-larger homes. You could do okay selling to a newcomer, and it was easy to trade up.

Calvin and Beatrice Shaw, with Morgan, in their Roswell, Ga. home.

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Slow but steady Prices in these cities have risen at a moderate rate, and growth is forecasted to more or less maintain the same pace. Market  Change (2003 - 2005)  Forecast (2006 - 2008)  Memphis  11.9%  12.1%  Raleigh, N.C.  11.2%  9.2%  Atlanta  12.1%  7.4%  Columbus, Ohio  10.8%  7.3%   Home price changes reflect annual averages.  Source: Fiserv Lending Solutions, Moody's Economy.com

Now that the economics of housing are changing, that might not be enough of a strategy.

Here are the new rules:

In a market like Atlanta, which saw average appreciation of only 4 percent a year during the height of the boom, stretching to buy the biggest McMansion on the block isn't going to pay.

As higher interest rates erode buyers' purchasing power and prices weaken at the high end of the market, "the further out and the larger you build your home, the longer you'll have to wait to see a return on your investment," says Philip Rassel, head of the Atlanta division of Metrostudy, which analyzes housing markets.

Nationwide, Americans' desire for bigger homes seems to be weakening. The size of the average new U.S. house has stabilized in recent years at 2,430 square feet after three decades of steady expansion, according to the Census Bureau.

And the American Institute of Architects reports that luxury kitchen appliances and upscale bathroom fixtures are becoming must-have features for new homes.

Out: formal dining rooms.

The glut of big houses has some homeowners, like Mark Miller, 45, and his wife Christine Schneider, 42, thinking that this is a good time to cash in. "If you push up supply too much, prices have to come down," says Miller.

The couple, who have a daughter, Josie, 3, bought their 4,100-square-foot home in suburban Marietta from Schneider's parents six years ago for $450,000.

Today they figure they can sell it for about $700,000, and plan to do so before the market softens. "A big chunk of our net worth is tied up in the house. We want to capture that gain," Schneider says.

After they sell the couple expects to spend about the same amount to build a smaller, more energy-efficient home in a neighboring community where they can walk to stores and restaurants. "We could drop 1,000 square feet easily," says Schneider. "I don't believe in having space we don't use. It's expensive to heat."

Downsizing, of course, isn't for everyone. If you own a supersize home and can afford to maintain it, enjoy. Just keep in mind that it may take longer than you think before you can sell for a big profit.

In a market where investors can no longer count on much of a return from a quick flip, being a landlord is the name of the game. But only if the numbers work.

"Your money should come from paying down your mortgage and the cash flow the property produces," says Gary Eldred, author of The Beginner's Guide to Real Estate Investing, "You're looking at total return, not just appreciation."

Finding properties that net a positive cash flow is nearly impossible in pricey coastal markets like San Diego or New York City. But it can be done in a non-bubbly one. And landlording looks especially attractive in fast-growing sunbelt cities such as Atlanta, Austin and Raleigh, N.C.

In Atlanta, says local agent Gwen McKinley, three-bedroom starter homes can be had for under $200,000, and demand for rentals within easy commuting distance of office parks is high.

When Roswell, Ga. residents Calvin and Beatrice Shaw, both 45, purchased their first rentals last year, they looked for properties in South Atlanta, in a new development close to several highways.

The Shaws, who have a daughter, Morgan, 18 months, purchased two small three-bedroom homes for $130,000 each and rented them for $1,100 a month. That's enough to easily cover the mortgage payments of $750 a month plus about $150 worth of insurance and property tax costs.

"The idea was to find properties that paid for themselves so we could hold on to them for many years," says Beatrice. They plan to keep buying.

Before you let tenants sign a lease, check them out.

Joan Farbstein Kaplan, who owns four rental properties in Atlanta, learned that lesson the hard way. During a slow period for rentals, Kaplan, 44, who buys single-family homes in the $250,000 range and prefers middle-income professionals as tenants, rented one of her homes to college students.

"A neighbor e-mailed me saying he had called the police 11 times in one month due to noise and commotion! My husband and I had to call a meeting with the tenants, pleading with them to stop having band practice and parties at home," she recalls.

So check credit and references. And ask about amplifiers.

Finally, keep enough cash in the bank to cover costs if you can't rent the property for a few months or need to make unanticipated repairs. A management firm that maintains the property and finds renters will charge 5 percent to 10 percent of your rental income, but avoiding landlord hassles might be worth the squeeze on your profit margin.

After all, in a slow-climbing market, you'll likely be holding on to this property for a very long time.