Many people think about buying bank owned real estate as a chance to purchase undervalued property to re-list it at a higher price. But there is another property investment choice that sometimes gets less attention. It’s the rental market.
What do REO properties have to do with rental properties? A lot, actually, according to one San Jose property management company. Let’s focus on two important points here: Purchase price and rental price.
Foreclosures affect purchase prices
First, and this is important, foreclosures in the neighborhood affect the purchase price of a home, which in turn affects the investment value of the property. If you are not able to acquire a home at less than market value, you will likely have a hard time keeping a positive cash flow on the property.
Foreclosures have an impact on rental prices
Second, foreclosures affect the dynamics of the rental market by putting former homeowners out into marketplace to create demand for rental properties. When a larger quantity of potential renters competes for a limited number of properties to rent, the price is going to go up or at least remain relatively stable. This can help provide a stable, positive cash flow for the property.
As a results of these foreclosure factors, smart rental property investors are showing up in droves to participate in the foreclosure as rental market. It’s a fact that very few rental markets nationwide are suffering, and that’s because more former homeowners than ever before are being forced to rent due to circumstance.
One Colorado Springs property management firm suggest that rates of vacancy have gone down steadily in 2010 over 2009. This is positive news for investors interested in snapping up Colorado Springs rentals as the real estate market is seeking to correct itself from the peak experienced in 2006.
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