There is a silver lining of sorts in this cloud, though. For all of those years running up to 2006, when prices seemed like they would never stop rising, buying for real estate rental property investment was difficult to impossible. The price the real estate investor had to pay for a home made it impossible to generate positive cash flow from the market rate for rental. Everybody was buying, with fewer renting.
When the housing markets began to trend lower, fewer sales, higher inventory, many more foreclosures, and mortgage tightening, the astute investor began to pay attention. In many areas where real estate rental property investment had been difficult to impossible, there were suddenly prices for homes that had dropped to a point where rental might be an option. Bargains in short sale and foreclosure properties created opportunity to purchase a real estate rental property that would actually rent for a positive cash flow.
Another, often overlooked, positive factor is that these type of markets increase rental demand as well. With fewer people able to make a reasonable down payment, and mortgage criteria tightening, fewer homes are purchased, but more are rented. So, the combination of falling home prices and higher demand for quality rental property creates opportunity for real estate rental property investors.
What we should remember is that this opportunity isn't just presented in the form of national trends. They can, and do, resolve themselves, with markets moving the other way at some point. However, this situation plays out continually somewhere in the country. Real estate is local, and there are always going to be places where rental demand is increasing while home prices are falling. If you are investing in real estate rental property in one of these localities, recognize the trend and profit from it.
