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Buying a home has been the quintessential American dream for many families; however, if market conditions persist, mom and pop could be shoved out of the way.

As the nationwide housing market improves, institutional-level investors are increasingly crowding in to get a piece of the action. Experts say it’s something of a milestone for the economy as well as real estate companies.

“It’s a big increase in our business – people who are either holding onto their houses and renting them, or getting into the market to buy things to rent,” said Jenelle Isaacson, the founder and owner of Living Room Realty in Portland. “For the first time in the last 10 to 12 years, it costs the same to rent as to buy, whereas those (amounts) were so uneven for so long.”

Isaacson said that mortgage payments are now equivalent to rents in many markets. For instance, a $300,000 bungalow in the Alberta neighborhood of Northeast Portland can come with a monthly mortgage payment around $1,200 to $1,400 (including taxes and insurance). She said that such a house can easily rent for $1,800. That kind of potential for profit has generated interest from investors.

Meanwhile, Isaacson late last year started a separate company, Living Room Property Management, specifically to handle rental and investment properties. The company recently started performing tenant placement services – but not just for investors.

“Because the rental market is so tight, (renters) hire our Realtors to help them find a rental,” Isaacson said.

Investors are taking note.

“Typically, the single-family market has been very much the purview of more individual investors – mom-and-pop investors who are buying up one to ten properties on average,” said Daren Blomquist, RealtyTrac’s vice president. “It’s become of much more interest to institutional investors because of the extremely favorable mix of market conditions for single-family rentals that has occurred. So they’re entering, or have been over the last year, in droves and buying up properties in bulk.”

Blomquist said many people who lost their houses to foreclosure during the recession are now renters, but they still prefer to live in single-family homes. So, rental demand is strong. Meanwhile, home prices and interest rates are near rock bottom.

Firms like Blackstone, a publicly traded global investment company, and Waypoint Real Estate Group, a California-based residential real estate owner, are snatching up foreclosed properties by the hundreds in select markets, according to RealtyTrac. Those groups are operating mostly in California and Arizona, where the average amount of cash flow from a financed property can be in the hundreds of dollars each month.

In Portland, the average amount of positive cash flow from rent on a property with a mortgage is just $24, according to RealtyTrac. Nevertheless, investors – mostly local ones – are lining up.

“What’s hard is it’s putting the squeeze on the first-time homebuyer,” Isaacson said. “They’re competing against much more sophisticated buyers that are buying with cash or with quite a bit down … They’re putting 25 to 50 percent down … That’s hard because the first-time homebuyer just can’t compete with that.”

But that does boost the housing market’s health. Isaacson said Portland-area homes listed for sale are garnering as many as 12 separate offers. The median sales price has increased 8.5 percent in the past 12 months to $238,500, according to the Regional Multiple Listing Service.

Blomquist believes investors will move away from single-family housing as the spread between purchase price and rental revenue decreases. Until then, Nick Krautter, a principal broker for Keller Williams Realty, said savvy investors should look at the outskirts.

“I think you’re going to have to look in B and C areas,” he said. “To try and do it in an A area doesn’t make much sense financially. That’s due to higher price points, but it doesn’t mean that the house gets higher rent.”

Along part of Southeast Clinton Street, for example, Krautter said a three-bedroom, two-bathroom house may cost upwards of $400,000 and rent for approximately $2,000 a month. After taxes and insurance, the spread between monthly payments and rent is $200 at most.

But past Southeast 70th Avenue, an investor can get a three-bedroom, two-bathroom house for $150,000. With monthly payments around $850 and rents bringing in approximately $1,200, cash flow jumps to $350 a month.

“The return is way better – more dollar-for-dollar profit, and lower investment,” Krautter said.

Isaacson, however, prefers the inner-city core.

“People … move to Portland for lifestyle – period,” she said. “They do not move to Portland to live just anywhere. They want to live in (the city of) Portland and they’re willing to pay a premium for that.”

Regardless of a property’s location, Blomquist said individual homebuyers should not be lured into bidding outside of their means against investors backed by big money. Krautter said there are simple steps for the moms and pops of the world to follow.

“You need to have a metric: cap rate, cash flow, gross rent multiplier … things that a buyer needs to be prepared to answer for me to do my job and find them the right property,” he said. “What are your goals? What are your expectations? And how much risk are you willing to take? If you can decide on those, you can decide what path you should take.”