PROVIDENCE – When Kate and Devin Reilly began house hunting last fall, they weren’t searching for a multifamily house, and they weren’t sure they wanted to buy in the Armory District.

But today they are happily settled in the sunny second floor of their three-family house at 4-6 Ellery St., a former foreclosure.

Before the Reillys bought it, it had been purchased and rehabbed by a West Side real-estate developer, the Armory Revival Co.

The Reillys are enjoying their stylish new kitchen and have planted a garden on a formerly paved section of their backyard.

Jane Driver, an agent with Armory Properties, the sales division of the company, remembers what the house looked like before the rehab, when the bathroom in the Reillys’ unit was literally covered with ice, the result of a burst pipe during the winter.

Kate Reilly said Armory Revival already had the other two apartments in her house rented by the time they closed in April. The house cost $279,000, and the cash flow from the rentals makes being first-time homeowners easier, she said. The young couple was also eligible for the $8,000 first-time homebuyers’ tax credit.

And because the property had already been rehabilitated, “we got to move in and do a lot of the fun stuff,” like decorating, instead of having to worry about undertaking a renovation project, she said.

During the real-estate downturn, the most active segment of the city’s real-estate market has been foreclosed houses owned by banks.

Priced to move, these properties are quickly snapped up by investors and other bargain hunters. Armory Revival had bought the Reillys’ house for $60,000 in February 2009, when it was bank-owned.

Some of the prices even spark bidding wars. One house, an 1890 Colonial at 49 Powhatan St., in the Armory District, had 18 offers after it was listed for sale at $49,900 in May 2009, according to Raymond Horbert, an agent with Williams & Stuart Real Estate.

The house eventually sold on July 24 for $72,000, even though “it needed to be totally gutted,” Horbert said. The winning bidder was the Armory Revival Company.

According to B.J. Dupre, one of the founders of Armory Revival, the company has been buying, rehabbing and reselling foreclosed houses in South Providence and the West End throughout the foreclosure crisis.

Dupre said the company’s strategy has been to buy distressed properties in or near the city’s historic neighborhoods that have already experienced significant renewal and reinvestment. The houses are then turned around and resold, at a profit.

Dupre said that the prices on the rehabbed units are in the same price range as many publicly-funded “affordable” housing units.

Although Driver said some of the buyers have been eligible for a city program that helps first-time buyers, Dupre said the money his company has used to buy the foreclosures has been private investment, because most banks still aren’t lending on foreclosed properties.

It can be difficult for a buyer to get a mortgage for a house that has been stripped of its electrical, plumbing and heating systems, he said.

Dupre said his company aims to buy clusters of properties in the same neighborhood, so that buyers can see theirs are not the only properties being improved.