7 On Your Side takes a look at both sides of flipping homes

You've seen the shows about investors buying homes, rehabilitating them and selling them for a profit -- it's called "flipping." But how easy is it to make money flipping a home and what about the impact on the neighborhood and tenants?

Seven On Your Side has been following one project for a year and has some answers. We need to say one thing up front -- flipping is not something you'll want to do in your spare time. It's a major commitment, and a lot of work. If you're willing to put in the time and take on some risk, you can make money, but critics say the adverse impact of flipping on neighborhoods is too high a price to pay.

Alex Schroeder of Futures Designed loved the show "Flip This House" on A&E. He credits the program with inspiring him to become a full time flipper and says he flips about four homes a year.

"And that's fairly modest. Certainly if one builds a business around it, one can expect to do five, six or 10 or one a month," Schroeder said.

He partners with Ken Gendemann of Alchemy Management Group. The two split the risk and also the profit. The pair purchased a foreclosed, three-bedroom, one-bath home in Berkeley. An investment group bought the property at a foreclosure sale for $461,000. Then turned around four months later and sold it to Gendemann's Alchemy Management Group for $535,000. Gendemann and Schroeder will rehabilitate the home, add a second bathroom and then resell it.

"With a project like this, you're looking at a good four weeks," Gendemann said.

Gendemann calls this a typical rehab for a distressed property. There are engineering, foundation, electrical and plumbing issues that need to be fixed. We even saw a wall that had been ripped out.

"Typical, typical distressed real estate. People taking out their frustrations perhaps," Gendemann said.

If all goes well, Gendemann and Schroeder can expect a handsome profit.

Daren Blomquist is with RealtyTrac. He told 7 On Your Side, "In San Francisco, the average flip gave a gross profit of more than $100,000 in the first quarter of 2014."

However, that's down from a year ago when the average rate of return was 37 percent when more homes were being foreclosed.

Gendemann isn't concerned. He said, "If you're clearing 20 percent, that's pretty comfortable."

Gum Gee Lee is the other face of flipping. We first met her in October of last year -- the same time Gendemann and Schroeder were purchasing their home in Berkeley. An investor bought Gee Lee's San Francisco apartment building with plans to evict her and the other building's tenants then convert the building to condominiums. Gee Lee and her husband, Poon, fought to stay in their home. They lost.

Gee Lee talked to us through an interpreter. She said, "There's a lot of people like me that are being evicted, that are being forcibly moved out of their homes, that are having a hard time finding a place to live again."

In cities like Oakland and San Francisco, the impact of flipping is attracting some major concern. In San Francisco, speculators have targeted rent controlled buildings like the one once occupied by Gee Lee.

"It's devastating in San Francisco when real estate speculators buy rent controlled homes where people are living, evict everyone from their homes and quickly flip those units," Dean Preston from Tenants Together said.

A map of West Oakland represents all the foreclosed properties bought between 2007 and 2011 by just one investor, REO Homes. REO is one of Oakland's biggest foreclosure investors and today rents hundreds of homes it fixed up in West and East Oakland. REO Homes told us it "rehabilitated properties that were in severe disrepair" and is "invested in Oakland for the long term." Critics say REO's rental conversions have priced many longtime residents out of their neighborhoods.

"What's happening in the Bay Area, and certainly most acutely in San Francisco, are rents going through the roof. It's a regional crisis," Preston said.

But Schroder grimaces when he hears such criticism of flipping because he says it's demonizing an entire profession. He said, "We buy properties at a discount. That's where we make our money. We can't really sell them higher than the market."

And Schroeder points out flipping is always a risk. His Berkeley rehab has stretched into December. A rebuilding project that was supposed to take four weeks is now into its fifth week and nowhere near being done. In fact, the permits from the city of Berkeley wouldn't be approved until March. The so-called third bedroom turned out to be an illegal addition done by a previous owner. That caused one permitting delay after another.

"This project ended up taking three to four months longer than had anticipated, so we had incremental holding costs that were not budgeted for," Gendemann said.

Construction on Gendemann and Schroeder's Berkeley property wasn't completed until this summer. But they ended up selling it for $949,000; that's $414,000 more than they bought it for.

Schroeder said the profit margin was somewhere between 35 and 50 percent. He said, "It's a good play. It's very rewarding. Like I said, it is worth two or three smaller flips."

Back in San Francisco, the unit Gee Lee was evicted from is selling for $759,000. She said, "I'm not holding a grudge against what happened to me. But you know, it was hard for me to deal with in my heart."

Proposition G in San Francisco would have imposed a property tax of 14-24 percent on any building sold within five years of purchase, but it failed at the polls on Tuesday.