RENEE MONTAGNE, Host:
Unidentified Woman (Auctioneer): 236,000, 236,100...
MANDALIT DEL BARCO: Unidentified Woman (Auctioneer): 237,500 dollars, third and final, taking no further bids.
DEL BARCO: Professional real estate investors camp out at these public auctions whispering into cell phones and tapping into their laptops before bidding.
ROBERT WASMUND: Of course we're buying a lot of these properties without ever being inside them - at trustees, courthouse steps.
DEL BARCO: Robert Wasmund is a partner with Anchor Loans who says buying a house even sight unseen is worth it if the price is right. They'll make repairs and resell the houses for a profit in a matter of weeks or months. It's a practice known as flipping.
WASMUND: Flipping, that's the biggest new thing across the country.
DEL BARCO: New because it's happening in one of the country's worse housing markets. Some parts of Los Angeles are littered with foreclosed homes. Anchor Loan sees opportunity. Wasmund recognizes that flippers are sometimes perceived as vultures.
WASMUND: People feel like it's not a positive thing, because maybe they're breeding the same type of situation as we ran into before. But of course, the flippers like us, we feel completely opposite that we are taking these homes that people have lost that are in disrepair, fixing and putting these homes back into consumer's hand, is the way we feel.
DEL BARCO: Wasmund says his company is trying to help the local housing market recover. Anchor not only buys and flips houses, it lends money to others who want to do the same. Just a few years ago, flipping houses was a ticket to quick, easy money, says Stuart Gabriel, a real estate expert at UCLA.
STUART GABRIEL: It became increasingly easy to purchase a home, hang on to it for a few months, maybe put a little lipstick on the pig, as the expression was, and then to turn it over, you know, pretty swell profit.
DEL BARCO: Then the housing bubble burst.
GABRIEL: And of course in today's world, short run turnover of housing for investor purposes has become a very dangerous game. It's fraught with a high level of uncertainty, and hence, a high level of risk.
DEL BARCO: Risky like poker, which five of the principals at Anchor Loan played professionally. The company's cofounder was even inducted into poker's World Series Hall of Fame.
WASMUND: We are experts in risk-reward analysis.
DEL BARCO: Executive Vice President Wasmund says the skills he and his partners learned at cards are extremely useful in the house flipping business.
WASMUND: No doubt about it, very important. Key to real estate, in general, is being unemotional, being able to look at all the information, analyze the information, and make objective decisions without being emotional - just like in poker.
DEL BARCO: Another key is knowing where and when to play their hand.
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DEL BARCO: Construction workers scrape faded wall paper from the dining room of a rundown house next to the freeway in L.A.'s Pico-Union neighborhood. Anchor Vice President Robert Fragoso says the company bought the two-bedroom house for $180,000 in cash at a public auction.
ROBERT FRAGOSO: This house was pretty well neglected. It looked like it was a hodge podge of different remodels and we'll essentially take it back down to the basics and remodel it.
DEL BARCO: Now after just one month, crews have completely gutted and redone the interior, painted the exterior, and re-landscaped the yard. Fragoso figures Anchor spent about $40,000 on the fix up. It's already set to go back on the market for about $100,000 more than it cost to buy.
FRAGOSO: We get paid for creating a nice polished diamond out of a rock. We try to identify niche pockets.
DEL BARCO: Niche pockets like South L.A. and other lower-end markets filled with bank owned homes, places where Anchor sometimes offers up cash for keys to property owners who just want out quickly. Fragoso says a company's MO is to turn over as many of these houses as quickly as possible for profits of 12 to 15 percent. It's a volume game.
FRAGOSO: You know, there's a lot of investors who are out there looking for a homerun deal every single time. And our business model is that, you know, we're looking for singles and doubles. You'll hit the occasional home run and grand slam here and there, but you can't build a business that way. And so you build your business, you know, hitting singles and that's how the best ball players have been around.
DEL BARCO: Mandalit del Barco, NPR News.
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MONTAGNE: This is NPR News.