All those folks who can’t buy a home are producing smiles on the faces of landlords. For many months vacancy rates were forcing sobs from rental property owners. The pool of potential tenants had been greatly reduced, because everyone was buying a home. Home prices were still relatively affordable and there were big buckets full of mortgage money available at historically low rates. People didn’t need to rent when they could buy.

The high Foreclosure rates changed all that. Now more people are seeking good homes to rent, so the supply of available rentals becomes slim. Demand for rental homes has also been stimulated by a reduction in the number of available apartments.

But it’s not all good news for landlords.

Some eager investors bought investment homes near the top of the real estate price cycle. They paid high prices for the homes they are now offering for rent. Many are learning that the cost of mortgage payments, taxes, insurance and other normal costs are leaving them with negative cash flow. That means it is costing them more each month to own the property than they can collect in rent.

The investor’s negative cash flow can amount to as much as $500 or more. Each month the owner must take those hundreds of dollars out of his/her pocket to make up the short fall between rents collected and money paid out in loan payments and so forth. That’s called an alligator property, because it can eat you alive.

Negative cash flow can be avoided by making a larger down payment on the property. You then have a smaller mortgage loan with smaller monthly payments. If you have planned correctly your rental income should then cover all your costs and expenses of owning. The down side is that you have a large amount of cash locked into one property.

The wise investor always buys at a price that will allow him to prosper no matter what happens to real estate values.

Similar Articles:

• Playing The Real Estate Rental Game
• Short Sales: Should You Let the Sellers Rent?
• Landlords: 5 Reasons to Examine Foreclosure Sales
• Figuring Out Whether You Can Afford That Home
• Quick Update on Kenny Rushing’s Free House Giveaway

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