A lot of investors think about purchasing foreclosures as a chance to purchase undervalued property to turn around and sell it at a higher price. But there is another real estate investment technique that often goes unnoticed. It’s the rental market. What do foreclosures have to do with rental properties? A lot, actually, according to [...]
A lot of investors think about purchasing foreclosures as a chance to purchase undervalued property to turn around and sell it at a higher price. But there is another real estate investment technique that often goes unnoticed. It’s the rental market.
What do foreclosures have to do with rental properties? A lot, actually, according to one San Jose property management company. Let’s focus in on two important points here: Purchase price and monthly rental potential.
Foreclosures affect purchase prices
First, foreclosure in the area affect the value of a home, which in turn affects the investment value of the home. If you can’t acquire a home at less than market value, you will likely have a difficult time maintaining a positive cash flow on the property.
Foreclosures have an impact on rental prices
Second, foreclosures have a dramatic effect on the dynamics of the rental market by kicking 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, rents are going to go up or at least remain relatively stable. This can help provide a stable cash flow for the investment.
Because of these foreclosure ROI factors, savvy investors are stepping up to the plate to take part in the foreclosure investment opportunities. In fact, few rental markets throughout the U.S. are hurting, and that’s because more people than ever are being forced to rent.
One Colorado Springs real estate company says that rates of vacancy have decreased steadily in 2010 over 2009 rates. This is great news for investors interested in snapping up Colorado Springs rentals as the real estate market seeks to correct itself from the peak in 2006.
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