Look before you leap: foreclosed homes can turn big profits--or turn into a money pit.

• Author: McFadden, Josh
• Position: Business Trends

Even in a struggling economy, some J--/real estate properties are attractive investments. The practice of buying foreclosed homes is alive and well, and experts say a lot of money is to be made in these properties.

"This is a good market for flipping--fixing up a foreclosed home and selling it for profit," says David Madsen, broker and owner of Thornton Walker Real Estate. "You can get homes for a good price and then sell for a good return."

There certainly are plenty of foreclosures to choose from.

RealtyTrac, which collects data on auction and bank-owned listings throughout the United States, reported that there were 19,661 foreclosed homes in Utah as of June 30. A reported 7,566 such homes could be found in Salt Lake County alone, along with 3,587 in Utah County, 1,385 in Weber County, 1,136 in Davis County and 806 in Summit County. Outside the Wasatch Front, Washington County led the way with 2,129 foreclosed homes. Statewide, one in every 294 homes received a foreclosure filing in June 2011.

DeAnna Dipo, Salt Lake Board of Realtors president, says prospective foreclosed property buyers are finding great deals, particularly those purchasing Salt Lake County homes.

"Buyers are getting great value--usually below market value," she says. "Salt Lake County pricing has stabilized. Higher-end properties are 40 percent to 50 percent less than two to three years ago."

Dipo says an advantage to buying foreclosed homes is that typically everyone who does so has equity right away. She also says a 3 to 4 percent equity increase per year is a healthy market.

"Too much of an increase too soon is a concern," she says. "But you don't see the high highs and the low lows in Utah."

Both Madsen and Dipo acknowledge that many foreclosed property buyers pay with cash.

When investing in foreclosures, the idea is to purchase the foreclosed properties, make needed repairs and improvements, and then put them back on the market to hopefully sell at a higher price. Madsen says the ultimate goal is to turn around and sell the properties for a profit in as little as 90 days. He says this is certainly achievable, but in reality, the turnaround time varies depending on the cost of the home and the location, among other factors.

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Buyer Beware

While investing in a foreclosure has the potential to bring good returns, one must exercise caution and sound judgment. Madsen says it's essential to have a well-conceived strategy and enlist the help of...