More people are renting houses and apartments because of the bad economy. The growing rental market is creating great investment opportunities for people who have cash, but who are getting poor returns on their money. The returns can be good news for investors in the real estate field.

The market is ripe for a better return than keeping money in local banks or credit unions, where you get less than 1 percent interest on CDs or money market funds. Instead of saving all your money in a bank, or in an unpredictable stock market, consider investing in renting houses to others. It can bring up to 20 times more return than savings account interests are offering right now.

One of the best ways for small investors to start investing in real estate is to buy homes or condominiums that have dropped in prices considerably from their last sales. One good way to find such bargains is through short sales.

A short sale occurs when an institution holding a mortgage on a property agrees to let it be sold for less than they are owed. It is an alternate to a housing foreclosure for a bank. They lose money on the sale, but get rid of a property without having to go through the foreclosure process, often saving them both time and money.

A short sale happens when a bank lets a property be sold for less than the balance of the unpaid debt. The bank may or may not include the release of any liens outstanding, but must get approval from a government agency like Fannie Mae to do so. Buying property through a short sale requires a lot of patience, because it may take months to finalize negotiations, even after giving a cash deposit. Also, these sales do not always go through. But a short sale could save a lot of dollars off what the property was worth in 2007, for example. It could also bring profits if you sell it later, if its value increases back to where it was before the recession.

Short sales, like foreclosed homes for sale, need to be checked for outstanding liens against the properties that you could be responsible for paying. Careful due diligence is always necessary, so that you are not taking on more problems than you anticipated. It is best to work with a trusted real estate agent or lawyer for advice before settlement.

Smart buyers compare resale home prices, in the area where the proposed housing purchase is located, before offering a bid. Check rental prices for similar units, as well, so that you can figure out your likely return on your investment.

There are many tax advantages to owning rental housing. Property taxes, operating expenses, supplies, utilities and insurance costs are deductible. Depreciation and even losses on the property are deductible on your IRS tax forms.

There are also disadvantages. While you will be investing for the long term, your housing investment is illiquid, compared to readily available money market funds.

Tenants should be screened properly before the rental. Dealing with difficult tenants can be a problem. They may not pay rents on time, skip before the lease has been fulfilled or leave the property with damages beyond the value of their deposits.

 When you buy a property for investment, you need to consider how much money you need to spend on repairs or deferred maintenance, and the down payment you are willing to make. You also need some working capital, for insurance and other costs.

Key potential renters are single adults, families, nearby college students and new people relocating into your area. You can advertise in local newspapers, in free postings on Craig’s List or similar Internet sites, or retain a real estate rental management company. You should check rental rates and trends in the area where the housing is located. It pays to visit the location’s area to see if you think that real estate will increase in value in the future, in that particular market.

This is a great opportunity for people who are working only parttime, or are retired, to add to their incomes, by investing in real estate in these tough economic times.

There is always a risk, but if you buy carefully, check to be sure the financials work and do proper due diligence in checking your potential obligations, buying rental housing units can be a good investment. The timing is right. Why not plan to buy one house now, and start to build your nest egg for higher financial returns in the future.

— Bernard Featherman is a business columnist for the Journal Tribune and former president of the Biddeford-Saco Chamber of Commerce.