New Business March 31, 2010, 11:05PM EST

Return of the House Flippers

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Bidders at a Phoenix foreclosure auction. Joshua Lott/Bloomberg

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Newcomers to the Game

The business is also attracting newcomers like Brandon Hunt, a 28-year-old Indiana native who used $600,000 in cash supplied by his father-in-law to buy four foreclosed Phoenix-area houses in the summer of 2008—just before the boom went bust. Hunt had a few nervous moments as the stock market plunged in the fall of 2008 and considered renting out the homes if he couldn't sell them. "I was like, 'Did I just get into having my father-in-law's money tied up in four rental properties?' " He staged the homes with tasteful art and furniture, including kitchen tables where he envisioned buyers signing contracts, and his patience paid off. By the end of the year he managed to sell all four for a small profit, two to first-time home buyers, one to a woman going through a divorce, and the fourth to a couple who were downsizing.

Despite the scare, Hunt was hooked. Backed by more cash from his father-in-law, he turned over 46 properties last year, netting about $1 million. He's found that some bargain hunters, rather than face the hassles of buying a foreclosure directly, are willing to pay extra for new granite countertops, stainless steel appliances, and a fresh coat of paint.

Patricia and Eric Mattingly, both 43, are typical Hunt customers. In late January they closed on a $355,000 two-bedroom ranch with a pool and guest house across from a golf course in the Del Norte Place historic district in Central Phoenix. Hunt, who paid $209,000 for the house at auction in September and spent six weeks renovating it, earned $50,000 on the deal. The Mattinglys didn't even know they were buying a foreclosure. "A lot of the other houses we were looking at in the historic district were very old and needed a lot of renovations," says Patricia Mattingly. "We walked in and we said, 'Oh my god, this is move-in ready.' "

In Hunt's hands, flipping is a high-speed, high-tech process. The morning after buying a house, he visits with a locksmith to secure it. He decides how many fans, light fixtures, and cans of paint, and what flooring supplies he'll need and plugs the info into a spreadsheet on his BlackBerry. He then e-mails the order to the local Lowe's (LOW) home improvement store with an address and delivery date. The contractor arrives at the house the same day the supplies are delivered. The houses are typically ready to be listed two weeks later.

Foreign Buyers

Flippers are finding they can sell to foreign buyers who see value in the battered U.S. market. Real estate agent Brad Cozza, who has flipped foreclosed homes in the Cape Coral (Fla.) area to Israeli, German, and Spanish investors, says he got a lot of serious inquiries after making a presentation to 925 Israelis at a conference last month in Tel Aviv. The conference was organized by America Israel Investments, which buys foreclosed homes in Lee County, Fla., through auctions, short sales (in which the lender accepts less than is owed on the mortgage), and directly from banks. Edmon Mamane, the company's owner, said he pays $48,000 to $60,000 for homes, some of which were never lived in, and sells them to Israelis for about $80,000.

Dror Shlomi bought a 2,200-square-foot two-family house from America Israel Investments a few weeks ago for $79,000 in cash. The two families occupying the four-year-old property pay him a combined $1,300 a month in rent, which more than covers the $300 a month he lays out for management fees, taxes, and insurance. Shlomi says he is in the process of selling his 10 investment properties in Israel and shifting his focus to Florida. "Last year, prices in Israel went up and in the States they went down," he says. "So we decided this is the right timing to try to find interesting things in the U.S."

Will flipping once again become a national pastime? Some professionals say the opportunities are already shrinking. "If someone is thinking about quitting their day job [to flip houses], they should think twice," says Robert Fahn, 50, who along with a partner has bought and sold 10 homes in the Sacramento area since last February. With all the newcomers bidding up prices, he says, margins are getting squeezed and "at some point the market is going to go away." Even so, Fahn, who is scouting opportunities in Florida and Phoenix, says he is in it for the long haul. "This is not a get-rich-quick business," he says. "This is a grind-it-out business."

Gopal is a reporter for Bloomberg News .