As prices have plummeted investing in rentals is increasingly affordable. Purchases made now will reap handsome rewards when the economy rebounds

Everybody is worried about the real estate market. Sellers are anxious to get their homes sold, buyers are worried we will see another huge decline after they buy. For those investors who are careful enough to judge this unpredictable market, fear and uncertainty can set the stage for opportunity.

With lower purchase prices and interest rates the opportunities are much easier-even for an individual investor-to find a single-family home, condo, or a small apartment building that can cash flow or pay for itself. By bringing in more than enough rent to cover mortgage, taxes, insurance, maintenance, and other expenses these properties have become the cash cow many investors seek.  And with so many properties lingering on the market, buyers can have their pick.

Purchasing a rental property right now comes with a fair amount of risk, besides the fact that property values are falling, rents are also dropping, and vacancies are rising as layoffs across the country are becoming increasingly common. The pool of renters generally shrinks when unemployment worsens people tend to find more room mates to split the costs or move in with families or friends.

"Even though we know rents will decline in most markets in 2009 and 2010, beyond that there will be a shortage of new supply [of apartments] coming," said Hessam Nadji, managing director of research at Marcus & Millichap, an Encino, Calif.-based commercial real estate investment brokerage firm. "And the rebound in demand, because of an improving economy, could spell healthy growth from 2011 through 2015."

When asked to come up with to come up with a ranking of the markets where apartments provide the most rental income for the least amount of investment Marcus & Millichap said to focus on metro areas that, for the most part, are affordable for folks who don't have millions to invest. Single-family homes and condos in some of these markets can sell for less than $100,000 and a 20-unit apartment building can be purchased for less than $700,000.

Dallas-Fort Worth, tops the list where apartment buildings sell for an average of $30,000 a unit and every $3.76 of investment (in terms of the sales price) produces $1 of rental income. By comparison, investors need to spend about $8.19 on average nationwide for $1 of rental income.

Other low-priced markets that ranked high Fort Lauderdale, Jacksonville, Orlando, and Tampa, which have plenty of bargains, but you'd be competing for tenants with condo owners who are renting homes they cannot sell. Investors have been finding good income-producing properties geared to the area's many college students-a factor that also applies to other big university towns such as Columbus, Jacksonville, Houston, and Orlando. One investor, for example, is buying a 760-square-foot one-bedroom unit with four rooms for $222,000 in Boston's Brighton neighborhood, near Boston College and Boston University.

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