Buying Foreclosures to use for Investment Property

A lot of people think about purchasing REO property as an opportunity to buy undervalued property to sell it at a higher price. But there is another property investing choice 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 in on two important points here: Purchase price and monthly rental potential.

Foreclosures impact purchase prices

First of all, foreclosure in the area affect the value of a home, which affects the investment value of the property. If you are not able to buy a property at less than market value, you will have a hard time maintaining a positive cash flow on the property.

Foreclosures impact rental prices

Second, foreclosures affect the rental market by kicking former homeowners into marketplace to create demand for rental properties. When a higher number of potential renters is in competition for the same number of available properties to rent, monthly rents are going to go up or at least remain relatively stable. This can help provide a solid, positive cash flow for the investment property.

Because of these foreclosure factors, smart investors are stepping up to the plate to participate in the foreclosure investment opportunities. In fact, few rental markets throughout the U.S. are suffering, and that’s because more people than ever are being forced to rent.

One Colorado Springs real estate company suggest that vacancy rates have gone down significantly in 2010 over the previous year. This is good news for real estate investors interested in snapping up Colorado Springs rentals as the market is seeking to correct from the peak of the market in 2006.