A lot of people are talk about buying foreclosures when they consider the investment opportunities in the current market, but many are thinking of using real estate comps to flip the property for a quick profit. But there is another real estate investment option that sometimes goes under the radar. It’s the rental market.
What do foreclosures have to do with rentals? A lot, actually, but let’s narrow it down to two major points here: Purchase price and rental price.
Foreclosures affect purchase prices
First, foreclosures affect the price of homes, which affects the investment potential of those homes. If you can’t acquire a property at below market value, you will have a hard time maintaining a positive cash flow on the property as income property. The idea behind income property investing is to build up a portfolio of properties that produce a positive cash flow, adding cash to your bottom line each month. Properties that don’t do this are called “alligators” and will eat your balance sheet for lunch.
Foreclosures affect rental prices
Second, foreclosures affect the rental market dramatically by putting former homeowners out into marketplace to create demand for rental properties. When there are a higher number of potential renters compared to the number of available properties to rent, the price is going to either go up or remain stable. This can help ensure a stable cash flow for the investment property.
These factors combine to create a powerful affect on cash flow for smart investors. When properties are acquired for a portfolio at below market prices and put under professional property management to keep costs down and cash flow high, investors are sure to obtain a higher return on investment.
In fact, few rental markets in the country are suffering, and that’s because more people than ever are being forced to rent. What’s your take on the current rental market? Is it really booming in your region?
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