Investors Turn to "Flipping" Foreclosed Homes for Quick Profits

Private equity firms and other groups of wealthy people are purchasing foreclosures at distressed prices, rehabbing them, and selling them for a quick profit.

This used to be a game for amateurs, but because of the lack of other investment opportunities, the money-management pros have stepped in.

The influx of new players is pushing up auction prices and making it harder to make a profit. The average discount at auctions — the difference between a home's sale price and its actual value — is 21.6 percent, down from 28 percent in January 2009, according to ForeclosureRadar.

"In crisis there's opportunity," says Rick Hudson, president of investment firm Prosperity Group Real Estate in Irvine, Calif. "Right now there's huge opportunity with flipping houses."

Source: Los Angeles Times, Walter Hamilton and Alejandro Lazo