Real Estate Investment Strategies: Buy Foreclosure for Rental Property

Many investors think about buying foreclosures as a chance to purchase undervalued property to put it on the market at a higher price. However, there is an alternative property investing strategy that often gets less attention. It’s the rental market.

So what do foreclosures have to do with rental properties? A lot, actually, according to one San Jose property management company. Let’s narrow it down to two important points here: Rental price and purchase price.

Foreclosures have an impact on purchase prices

First of all, and this is important, nearby foreclosures have an effect on the price of a home, which in turn affects the investment potential of the home. If you are not able to buy a property at below market value, you will likely have a hard time maintaining a positive cash flow on the property as income property.

Foreclosures have an effect on rental prices

Second, foreclosures have a dramatic effect on the dynamics of the rental market by putting former homeowners out into marketplace, creating a demand for rental properties. When there is a higher number of potential renters is in competition for the same number of available properties to rent, the price is going to go up or at least remain relatively stable. This can provide a stable cash flow for the investment property.

Because of these foreclosure ROI factors, intelligent rental property investors are showing up in droves to participate in the foreclosure investment opportunities that abound. In fact, few rental markets in the United States are hurting, and that’s because more people than ever are being forced to rent due to circumstance.

One Colorado Springs property management firm is saying that vacancy rates have decreased steadily in 2010 over 2009 rates. This is positive news for real estate investors interested in snapping up Colorado Springs rentals as the real estate market is seeking to correct from the peak experienced in 2006.