Imagine paying for a home in cash. Not just not taking out a mortgage, but buying a home with an amount of money small enough to fit in your wallet. That s what Volonte Williams, a real-estate investor, just did in Detroit, where he scooped up a three-bedroom house in a nice neighborhood for $5,500.

It s one of the stranger side effects of the real estate collapse: the pocket-change home purchase. Back in 2006 distressed property bank-owned or sold cheap by the homeowner to avoid foreclosure accounted for less than 10 percent of the market. Now, according to the National Association of Realtors, the category accounts for nearly half of all sales. The result: deeply depressed home values in neighborhoods from the east side of Buffalo, N.Y., to the suburbs of Orlando and Phoenix. And even as the credit crisis begins to abate and some housing numbers improve, experts expect this ugly underbelly of the market to expand for months, if not years, to come.

For many communities, this collapse is a true-life nightmare, as boarded-up homes plague one block after another. But it s also inspiring a new breed of eager real estate prospectors who are snapping up homes at absurdly low prices. While no one knows exactly what percentage of these homes is going to investors rather than owner-occupants, brokers across the country say they re doing a brisk business selling to outside speculators. National listing service Homes.com reports increases of 30 to 50 percent year-over-year in searches for homes in foreclosure-heavy states like California, Michigan and Florida. And at least some of those searchers are buying: Home sales are way up in hard-hit towns like San Diego, Las Vegas and Detroit. In many cities a cottage industry has emerged to serve these out-of-towners, including consultants who help identify promising neighborhoods and flippers offering all-in-one packages. The curious can even hop on foreclosure bus tours, which sell out weeks in advance.

To most investors, of course, buying a neglected home in a struggling city sounds like far more trouble than it s worth. But for others the crisis represents the chance to start on the path to Donald Trumpdom with a ridiculously low buy-in. Some see it as their last shot at making back the savings they ve lost in the stock market. Even venture capital firms and hedge funds are joining the action. They buy bundles of 200 to 1,000 homes scattered in cities across the country for 20 to 30 cents on the dollar, hire locals to rehab and rent out the most promising properties, and abandon the rest. Buyers know they are taking a big risk, but the prospect of developing a steady rental income, if not eventually flipping the home, keeps them coming. The return can be astronomical if it s done right, says Scott Galloway, a Huntington Woods, Mich., property attorney who represents venture firms based in Austin, Texas, and San Jose, Calif.

That s a huge if in a recession as deep as today s. Still, nowhere is this gold rush more frenzied than in one of the toughest markets, Detroit, where we spent a recent few days, and homes that sold for $120,000 in 2006 can now be had for a tenth that price. Never mind the headaches from copper thieves, crooked construction crews and notoriously high property taxes. The fire sale has attracted hordes of real estate optimists, who fly in with wads of cash or play the market from out of town, looking to assemble their own housing empires.

At first glance, Detroit certainly looks like it deserves its reputation as America s bleakest big city. As of December it had 67,000 homes in foreclosure, and City Hall is predicting a 25 percent vacancy rate. With the median home price inside the city limits dropping to just $5,800, property is so cheap that there s a movement afoot to convert parts of Detroit to an agricultural economy some residents are already tending alfalfa fields and herding goats.

But there s a case to be made for investing here. A shortage of quality rentals in safe neighborhoods keeps rents relatively high. Moreover, while the median home price in most cities is several times the median annual income, the inverse is true in Detroit, indicating room for price hikes once the credit market thaws. David Butler, a real estate veteran and founder of Hotspur Investment Group in Westminster, Colo., says his typical Detroit deal starts with buying a $15,000 single-family home in a nice area and spending another $30,000 on tax liens and repairs. Ongoing expenses such as insurance and property taxes cost another $3,000 a year. But the house can fetch $9,600 to $10,200 a year in rental income, and he expects to sell it for $80,000.

Returns like those are enticing droves of amateur investors. Tae kwon do instructor Donna Nowicki inhabits a universe a million psychic miles from the streets of Detroit. One side of her Center City, Minn., home faces a cattle herd; the kitchen overlooks a cornfield. But she spends many mornings online, touring Detroit s newest foreclosures, searching for a fixer-upper. And while she has been to the city only once, she has the house-hunting confidence of a native. Last year she and her husband, Jim, paid a local consultant to drive them around town and show them the good neighborhoods. Donna, 47, kept a notebook and marked down her favorite intersections. You can tell the areas where people are fighters, says Donna, a second-degree black belt. So far they ve bought three houses, sight unseen.

The Nowickis, who devour books by investing gurus like Robert Kiyosaki, decided long ago that real estate offers their best hope for a comfortable retirement. But Detroit was Jim s idea. A 48-year-old sprinkler installer, Jim thinks their contrarian bet will pay off when the auto industry rebounds. Already, the Nowickis have had one success. They paid $15,000 for an impeccable brick colonial in an upscale neighborhood. After just $5,000 in renovations, the home quickly rented to a retired fireman for $950 a month. A local property manager takes care of maintenance, tenant screening and rent collection, and the house should pay for itself in less than two years.

If only every transaction were so smooth. During the rehab of a second home, thieves broke in and stole the water heater, furnace, bathroom vanity even the toilet. Such burglaries are common, says Mark Maupin, a Detroit investor who teaches real estate at Wayne County Community College. Among experienced investors, standard procedure is to install an alarm system, tune the radio to the talk station and pay a neighbor $100 a month to park his car in the driveway.

The Nowickis did enlist help on a third property. A local woman has been keeping an eye on their $18,900 home near Mercy College and even threatened to shoot a vandal who tried to steal the air conditioner. I love having her there, says Donna. But even the neighbor can t fix the tenant, a single mom with four sons who Donna says lied about her job to get the rental. Despite several ultimatums, she s slow paying the $850 rent. Still, the Nowickis are far from discouraged; in fact, they re looking to scoop up a few more bargains before prices start rising.

They ll have to expand their empire a lot further and get their hands much dirtier to keep up with Volonte Williams, a former jazz musician and day trader turned real estate magnate. After success as a landlord on Buffalo s decayed East Side last year, he says, he flipped 10 properties for a $100,000 profit and grossed $14,000 a month in rent Williams turned his attention to Detroit. So far this year he s scooped up five homes, some for less than $5,000. He ll never forget his first visit to the nation s 11th-biggest city. It spreads out like an atomic bomb, Williams recalls thinking as he drove through the unending sprawl of boarded-up homes and businesses. Like a mushroom. Luckily, Williams has a field guide in fellow investor Shea Woods, a Detroit native, former forklift operator and self-described karaoke star who attracted Williams s attention with video tours of cheap properties that he posted on YouTube. Now Woods drives Williams house to house, advises him on deals, reminds him of appointments and makes his phone calls.

Their first stop one cool spring morning is to supervise the rehabbing of a recent purchase. It s a sunny 1920s home with hardwood floors, leaded glass and a handsome fireplace. Williams, who snapped it up for $5,500, is determined to keep his costs down. The three-man crew plastering and scraping the interior agreed to do the job for just $450, and Williams says he ll use even cheaper labor for step two: He can hire another local to paint the whole house for $75.

Next, they pile into Woods s white van to check out the first potential buy of the day, a two-family foreclosure colonial with a rabbit-warren layout, offered for $2,900. It s one of two promising properties they ll see this morning, a rare occurrence; many homes priced this low are beyond hope. The day before, the pair ventured to an unfamiliar neighborhood to inspect a bungalow for an out-of-town investor. They were shocked by the apocalyptic scene. Several homes on the block had been demolished. Vacant lots had reverted to prairie land. The remaining properties were caving in, burnt-out shells with smashed windows and missing doors. Woods had to call the investor and break the news: The block wasn t fit for human habitation.

This block, however, looks well tended, and while Woods and a friend shoot a video ( It s musty and has a smell to it, but that s okay! ), Williams does a quick inspection. Aside from a hole in the ceiling, the house is in good shape, empty but for an old Xanax bottle lingering on the windowsill. I d be willing to live here, says Williams. He tells Woods to call the broker and offer $1,000. Woods goes to work right away. Latrina! he shouts into his cell phone. We d like to make an offer on the Tyler property.

A thousand dollars, Williams reminds his friend.

Eight hundred, Woods tells the broker.

One recent morning, Jeremy Burgess, a rising star on Detroit s home-flipping scene, was interrupted at his desk by a call from France another potential investor with the usual qualms. Burgess immediately launched into his pitch. France is not too far away, he told the caller. I have investors in Lithuania! He talked up his properties cash-flow potential, the care he put into choosing neighborhoods and homes, the convenience of hiring a local property manager. Within 20 minutes the caller was practically begging to see a list of available properties.

Burgess, 29, is already a local realty veteran. Along with his wife, Jeanna Kiehle, a former ballerina with Lady Godiva hair and a business degree, he bought his first Detroit home in the summer of 2006. Six months later the couple moved to the Motor City to work the market full-time. They now own 13 rental properties, but their focus is on their rehabbing-and-flipping operation, Urban Detroit Wholesalers. Working 16-hour days out of a restored warehouse, they ve flipped homes to 43 buyers, many of whom have never set foot in Michigan. Burgess says that compared with folks who lost 40 percent in the stock market last year, he s doing great. I m up about 100 percent, he says. How about you?

How do you make a profit in a market where prices have been falling 4 percent a month? Burgess points to three small sections outlined in pink on his city map areas where the average income is high enough to support decent rents, and residents take care of their property. He buys homes in these neighborhoods at bargain prices, submitting hundreds of lowball offers to banks and taking the handful that pan out. He gets a rehab discount through a partnership with Motor City Blight Busters, a nonprofit that trains ex-cons for new jobs by putting them to work on Burgess s homes.

But Burgess is really selling what he describes as a hassle-free investment for out-of-towners who want Detroit property without the Detroit experience. A typical client is Paul Belt, a former military-systems analyst who lives in a small town in Nevada, east of Lake Tahoe. Belt, who has never been to the Motor City, spent two years researching the market but couldn t take the plunge. Then last December he stumbled on a promotional video for Urban Detroit Wholesalers in which Burgess says, Investing in Detroit is like walking along the street and shoveling up diamonds. The video explains how his company screens the property, clears tax liens, oversees the rehab and installs a tenant: No more sleepless nights! A few weeks later Belt wired Burgess $30,000 for a 780-square-foot bungalow plus $7,500 to cover the rehab. Someday, I m planning on flying out there and taking a look at it, Belt says.

If Belt made the trip, he d find a typical Detroit bungalow, neat as a nunnery, with ceramic tile in the kitchen, a fresh coat of tan paint and a postage-stamp front yard. He d also see several similar homes on the same well-kept block selling for less than $10,000. As it turns out, Burgess paid just $8,000 for Belt s home in foreclosure last October. While he had to pay $6,000 in liens and closing costs, he still doubled his investment when he sold the home to Belt. Belt says that s fine with him; if he gets the expected $850 rent, his $37,000 investment will soon pay for itself. And who knows how much it may be worth 10 years down the line? Everybody laughs when they hear he s bought a house in Detroit, Belt says, but he s certain the city will stage a big comeback. After all, it can t get any worse. Detroit, he says, is too big to fail.