First, whether it's a foreclosure (or a short sale, or a traditional sale) makes no difference at all.

What does matter is: (1) How much under current market value (comps) is it? (2) How much does it need in repairs? (3) How long do you plan on holding it?

Let's take one extreme: You want to buy it, fix it up, and sell it as soon as possible. You're just rehabbing; you're not planning on living there. OK. Determine what the house should sell for, nicely fixed up. Be realistic. Be conservative. Then subtract 5% from that figure. Now, take 65% of that number. Subtract from that number all anticipated repairs and updates, plus 10% for a fudge factor. That's the most you should pay for the house.

Let's work the numbers. You see a property that, when nicely fixed up, will sell in today's market for $500,000. To allow for the slow and declining market, and to be safe, subtract 5% from that. We're down to $475,000. Now, take 65% of $475,000. That comes to $308,750. Let's say the house isn't in too bad a shape. It needs $20,000 in fix-ups and repairs. We add 10% to $20,000 (rehabs always go over budget). So your rehab budget is $22,000. You subtract $22,000 from $308,750. That means your maximum allowable offer on the property is $286,750. You can't pay a penny more than that. So...if you can find a property that, fixed up, will sell for $500,000, needs $20,000 in repairs, that you can buy for no more than $286,750, you'll be able to resell it for a profit.

In a strong market, the numbers change a bit. You could buy at 70% of after-repair value, for instance, and you wouldn't have to discount the selling price by 5%. But that's not today's market.

If you're actually planning on living in the house for awhile, the numbers change, and you can afford to spend some more.

Many investors have decided that in today's market they'd rather not rehab and sell. Instead, they're buying and holding. In fact, you should always have a back-up plan, in case your first plan doesn't work out. And in today's market, a back-up plan for a rehabber would be to rent the property in case it doesn't sell. That means you not only should do the calculations above, but also know what the property would rent for, and whether you could manage a possible negative cash flow.

Hope that helps.

Depends on what you pay for it and how quickly it can be resold. Talk to realtors in your area about both these issues. In bad times, some people always make money. Just do your homework.

One would think it is..BUT!! Values have dropped to the price were lenders will sell them...not good.
So if you buy one and put $5,000 into it for example...you'll be upside down. Can explain further but not on here.... good luck

Ross and Kim,
Because of the generic nature of your question, it's impossible to answer. Suffice it to say that a properly researched purchase at the right price and in the right neighborhood has the POTENTIAL for profit.
Find a good Realtor, that you can trust, and let him/her help you. In terms of getting stuck with a house, there is just no way to properly answer your question, without talking about specific properties in specific neighborhoods. And, to be honest, you can NOT get around the risk factor.
Your Realtor can help you minimize that risk, though.

Keith Strawn
Keller Williams Realty
Ballenger Associates
Beaufort, SC

Hi Ross & Kim
It's definitely a time in Michigan for opportunists and investors! I would be very confident of the property and neighborhood you intend to flip in. However - there are other options for you to make money in this market...

Personally, I recommend purchasing investment property more than single family flips. Investment property will be ongoing maintenance as landlords but can provide a nice steady stream of income if you manage it properly... possibly $200 a month per unit as income after mortgage, etc. Pretty good - think about what you would do that extra income per month.

Stray from anyone who recommends flipping to get rich quick.
Best Wishes!

Ross & Kim, I'm not an expert in this, but some foreclosures can be good purchases. What type of experience do you, or members of your family, have in construction? if none or not much then you may want to consider searching for a short sale property.

In the Metro Detroit you probably will be competing with buyers that will fix it up and live in it, not sure if your area is the same but owner occupants will almost always pay more than an investor. Here the lower priced ones seem to make better flips. The stinkier + uglier the better.

the house is condemend it has so many violations. My son just had to vacate that property. It has a big history of structural defects available at the code enforcment office