A lot of people talk about buying REO property as a chance to purchase undervalued property to put it on the market at a higher price. But there is another property investment choice that often goes under the radar. It’s the rental market.

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 in on two major points here: Rental price and purchase price.

Foreclosures have an impact on purchase prices

First, and this is important, nearby foreclosures have a big effect on the value of a home, which in turn affects the investment value of the home. If you can’t acquire a property at less than market value, you will have a hard time keeping a positive cash flow on the property as income property.

Foreclosures affect rental prices

Second, foreclosures affect the rental market by kicking former homeowners into marketplace, creating a demand for rental properties. When there is a higher number of potential renters competes with a limited number of rental properties on the market, the price is going to increase or at least remain stable. This can help provide a solid, positive cash flow for the investment property.

As a results of these foreclosure factors, smart rental property investors are showing up in droves to take part in the foreclosure investment opportunities. It’s a fact that very few rental markets throughout the U.S. are hurting, 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 steadily in 2010 over 2009 rates. This is great news for real estate investors who are interested in buying Colorado Springs rentals as the market seeks to correct from the peak in 2006.