Many investors think about buying bank owned real estate as a chance to buy undervalued property to turn around and sell it at a higher price. However, there is an alternative property investing strategy that sometimes gets less attention. It’s the rental market.

What do foreclosures have to do with rentals? A lot, actually, according to one San Jose property management company. Let’s focus on two important points here: Rental price and purchase price.

Foreclosures have an effect on purchase prices

First, foreclosures in the neighborhood have an effect on the purchase price of a home, which affects the investment value of the property. If you are not able to purchase a home at less than market value, you will have a hard time keeping a positive cash flow on the property as income property.

Foreclosures impact rental prices

Second, foreclosures affect the rental market by putting former homeowners out into marketplace to create demand for rental properties. When a larger quantity of potential renters competes with a limited number of rental properties on the market, the price is going to increase or at least remain relatively stable. This can provide a stable, positive cash flow for the investment.

As a results of these foreclosure factors, intelligent rental property investors are stepping up to the plate to participate in the foreclosure as rental market. It’s a fact that very few rental markets in the country are suffering, and that’s precisely because more people than ever are forced to rent.

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


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