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For the first time in a long time the real estate market is showing us more positive signals than negative.  Nominal price drops in 883 core based statistical areas have finally stabilized, showing no declines in the past two months.  This is significant because we must see a flattening out in the market before we can see a cyclical turnaround.  We’ve also seen prices hit bottom in even the hardest hit markets in California, Nevada, Florida and Arizona.  Therefore, prices are not likely to drop much further.

In its latest quarterly report, even the National Association of Realtors (NAR) has seen a similar bottoming out in prices.  There are even signs of a turnaround in several key markets.  Year over year, homes sales were up in 26% of all states and 35% of all Metropolitan Statistical Areas.

The biggest prices jumps were in Yakima, WA at 8.9%, Binghampton, NY at 8.7%, and Amarillo, TX at 7.2%.  However, nationally the median sales price is still down by 7.6% from the second quarter of 2007 at $206,500.  And new housing starts fell by 3% last month primarily due to unsold builder inventories.

All this has prompted larger investors to jump in and start buying packages of properties, sometimes 10 or more.  So if you’ve been waiting on the sideline for the real estate bottom to arrive then your opportunity to start buying investment property may finally be here.

Setting the right rent can be one of the most difficult areas for many people who are investing in rental property.  If your property rents out in no time, it could be an indication that you are not charging enough rent.  On the other hand, if your property seems to take a long time to rent out, it could be a clear indication that your rent is too high.  So, how do you go about setting a rental rate that is in line with the current market?

One of the best places to start is the local newspaper.  It is imperative that you do some research to find out what rent prices are driving the local market. Location is the most important factor in determining rental rates. For example, a three bedroom, one bath home in one part of town may rent for $1,100 a month while a similar property on the opposite side of town may only be able to draw $900 per month.

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The ultimate goal of investing in rental property is to turn a profit.  To ensure that you achieve that goal it is essential that you follow several critical guidelines.

First, always make sure that you check tenant references.  This can be a burdensome step and many landlords overlook it because they feel as though they have good instinct when they meet with the tenant.  But not checking references can lead to a number of problems later on.  You will uncover a wealth of information about potential problems before you rent to a prospective tenant.

Second, make sure you have everything in writing.  This is to protect your rights as a landlord as well as the rights of your tenants.  Everything from the code of conduct you expect your tenants to abide by while renting your property to the rental application itself must be in writing.

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As a real estate investor, you can help maximize your profits by knowing the liquidity of a given real estate market. By knowing the liquidity of a market, you will better understand that market and therefore be able to take advantage of the various buying strategies afforded by it.

One of the measurements frequently used to gauge the liquidity of a given market is the absorption rate. This is basically the rate in which a specific segment of a real estate market sells in a given time frame. These segments are usually categorized by price range but may also be categorized by property type.

The easiest way to understand absorption is to put it in more tangible terms and measure it in “Months of Inventory”. In other words, we take the number of active listings and divide it by the total number of sold transactions within the same month to give us the months of inventory.

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