Buy Foreclosures for Income Property
Many investors think about purchasing foreclosures as a chance to buy undervalued property to re-list it at a higher price. However, there is an alternative realty investment strategy that often goes unnoticed. It’s the rental market.
So what do bank owned 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 have an effect on the value of a home, which in turn affects the investment value of the property. If you can’t acquire a home at less than market value, you will have a hard time maintaining a positive cash flow on the property as income property.
Foreclosures have an effect on rental prices
Second, foreclosures affect the dynamics of the rental market by ejecting former homeowners into marketplace to create demand for rental properties. When there is a higher number of potential renters competes for a limited number of properties to rent, rents are going to go up or at least remain stable. This can help ensure a stable cash flow for the investment.
Because of these foreclosure ROI factors, smart rental property investors are showing up in droves 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 before are being forced to rent due to circumstance.
One Colorado Springs property management firm is saying that rates of vacancy have decreased steadily in 2010 over 2009 rates. This is positive news for real estate investors who are interested in snapping up Colorado Springs rentals as the real estate market seeks to correct from the peak of the market in 2006.
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