Pitfalls Face Foreclosure House Flippers

The market for buying and re-selling foreclosed houses in Atlanta really took off a couple of years ago. Some people have made big profits from flipping houses they bought for a good price. There are risks and cautionary tales for those who are thinking about jumping into the house flipping fray.

A few months ago Kerman Haynes, an Atlanta realtor bought a foreclosed home just outside the perimeter for a mere $12,000. Haynes got busy on renovations.

"Things like refinishing the hardwood floors, re-glazing the bathtub, putting in a new kitchen and tile floors in the kitchen area," said Haynes. "You can re-glaze the tub for typically about $300."

Haynes said the most expensive repair to the home was a new roof for about $2,500 and the rest of the work was cosmetic. In all, Haynes said he put $10,000 into repairing the three bedroom home. The home sold within two weeks.

"We're all in for $22,000 for a market that will support a sales price of about 50 to 60 thousand dollars," said Haynes.

Haynes said to buy a foreclosed home and then flip, the buyer needs to know both the market and the neighborhood.

Haynes advised potential flippers not to let boarded up windows scare them away. "I would just look at that as maybe the next opportunity to come in and buy a home," said Haynes.

Eric Shulman, who has been buying, renovating and renting foreclosed homes in the Atlanta area for 15 years, said there are risks even for those who know what they're doing.

"I've had it where it was an easy renovation to oh my god what'd we do? Where we had to pull off the roof or we found a lot of rot underneath that we didn't see," said Shulman of Mid-City Management.

Another stumbling block to flipping foreclosed homes is crime. "People break in and steal things, the copper is missing from this house," said Shulman.

Shulman said he has found squatter living in foreclosed homes and had contractors who were robbed at gunpoint.

"It's not for the faint of heart. You have to be tough in this business," Shulman said.

Potential buyers also must have the money to invest. Shulman said banks aren't giving loans these days.

Shulman offered this advice, "Have a lot of cash, know about renovations, have your contractor lined up. Consider getting a gun."

Realtors advise going into any foreclosure deal with eyes wide open and suggest getting an appraisal and inspection before putting any money down.