Flipping a house means you buy a home for a low price and sell it for a higher one in short order; you can usually demand a higher price after you do some minor renovations. Flipping a new house doesn't give you a lot of options, since whatever is being built is what you get. Also, some communities require buyers to actually live in the house they buy so that a neighborhood isn't stuck with a bunch of empty houses. Buying a foreclosed home means you're buying from a lender.

Typically, buying an REO, or real estate owned by the lender, is a long process: It can take anywhere from six to eight months. When a bank forecloses on a home, it has to file papers with the court against the homeowner who didn't make his payments. The paperwork process takes a long time. If the foreclosed home is being sold by auction, you have to wait out that timetable. In comparison, flipping a regular, non-foreclosed fixer-upper can take just a few months. However, depending on the renovations you have to do and your luck, it could also take years.

Aside from the length of the process, it can be a bit harder to get financing in order to flip a foreclosed home. If you're willing to jump through the foreclosure hoops in order to get a good deal, you can look online to find sites that list REO homes. Plus, some of the lenders themselves list the houses they've foreclosed on. Even though these sites list homes across the country, experts agree that you shouldn't buy a house without seeing it in person first. Pictures can be misleading, and they don't show you anything else about the house or neighborhood it's located in.