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Many people talk about buying REO property as an opportunity to purchase undervalued property to flip it at a higher price. However, there is another property investing option that many times goes unnoticed. It’s the rental market.

So what do bank owned properties have to do with rentals? A lot, actually, according to one San Jose property management company. Let’s focus in on two major points here: Rental price and purchase price.

Foreclosures affect purchase prices

First of all, nearby foreclosures affect the price of a home, which in turn affects the investment value of the property. If you can’t purchase a property at below market value, you will have a hard time keeping a positive cash flow on the 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 is in competition for the same number of available properties to rent, the price is going to go up or at least remain stable. This can help ensure a stable, positive cash flow for the investment property.

Because of these foreclosure ROI factors, savvy real estate investors are stepping up to the plate to take part in the foreclosure investment opportunities. It’s a fact that very few rental markets in the United States are suffering, and that’s precisely because more former homeowners 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 significantly in 2010 over the previous year. This is good news for real estate investors interested in purchasing Colorado Springs rentals as the real estate market is seeking to correct from the peak in 2006.

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