Real Estate Investment Strategies: Buy Foreclosure for Rental Property
A lot of investors think about purchasing REO property as a chance to buy undervalued property to turn around and sell it at a higher price. However, there is an alternative property investment option that sometimes goes unnoticed. It’s the rental market.
So what do REO properties have to do with rental properties? A lot, actually, according to one San Jose property management company. Let’s focus in on two major points here: Purchase price and rental price.
Foreclosures impact purchase prices
First, and this is important, foreclosure in the area affect the value of a home, which affects the investment potential of the home. If you are not able to buy a home at less than market value, you will likely have a hard time maintaining a positive cash flow on the property.
Foreclosures have an effect on rental prices
Second, foreclosures have a dramatic effect on the rental market by ejecting former homeowners out into marketplace, creating a demand for rental properties. When a higher number of potential renters competes with a limited number of rental properties on the market, monthly rents are going to increase or at least remain relatively stable. This can help provide a stable cash flow for the investment property.
Because of these foreclosure market factors, smart residential property investors are coming out of the woodwork to take part in the foreclosure as rental market. In fact, few rental markets throughout the U.S. are hurting, and that’s because more former homeowners than ever before are being forced to rent due to circumstance.
One Colorado Springs property management firm says that vacancy rates have decreased significantly in 2010 over 2009 rates. This is good news for real estate investors who are interested in snapping up Colorado Springs rentals as the market is seeking to correct from the peak experienced in 2006.
