House flipping on TV not realistic view

House flipping seems to be the new American Dream. Television programs on the subject abound, showing individuals how to improve and sell a house (yours or someone else's) or transform one of the ugliest properties imaginable into a fabulous, who-would-not-want-to-livethere dream home. Bookstore real estate sections are bursting with how-to titles that make house flipping look quite easy. Even more intriguing are the friend-of-a-friend stories one hears: a neighbor says his uncle bought two homes and a new boat with the profits he made from flipping just a couple of properties. Sounds great, but is it really that simple?

Absolutely not, say Scott Frank and Andy Heller, co-authors of Buy Even Lower: The Regular People's Guide to Real Estate Riches. The reality TV view of house flipping conveniently leaves out the time, risk, stress, headaches, and failures. "It may look easy, fun, and exciting on TV, but TV is entertainment. The real world can be anything but," warns Frank. "I've found that most of the time people who jump into flipping real estate based on TV shows or hearsay from friends never fully know what they are getting themselves into."

"Most people want to get into house flipping to make a quick buck," adds Heller. "It usually doesn't take them long to find out that while that is possible in real estate, fast profits are the exception rather than the rule--and success rarely comes easy."

To help new investors, Frank and Heller have put together five reasons why buying and flipping property is not usually the cakewalk portrayed on television:

Flipping can be extremely time consuming. "Many first-time investors who choose the 'buy and flip' investment strategy don't expect to spend much time finding the property," notes Frank. "All those fix 'em up TV shows make it look like the properties are abundant, and that most of your time is spent repairing the property and getting it ready to sell. That's actually backwards. In reality, if you want to profit from your investment, you will search and search for a property that you can purchase at the right discount. Then you will actually make the repairs relatively quickly to get the home back out on the market."

Costs can get out of hand. First-time investors come in looking to implement dramatic changes--unaware that their goal should be to make the property comparable to surrounding properties, not better than them. "There is a difference between remodeling ... and making necessary repairs," explains Heller. "Focus on the necessary changes. Fix broken windows and patch a leaky roof, but don't put in a new swimming pool simply because it will make the house more valuable. Think, 'Will the repair or improvement make the house more profitable?'"

House flipping is a stress-filled business. Because profits actually are realized after the sale, every day that goes by eats into your profits. You want to sell the property as quickly as possible, which at times can cause quite a few headaches.

You may end up with a property that is hard to sell. Occasionally, you will buy a house at a discount because it needs more than simple repairs. It even may have problems that cannot be repaired at all. Is it in a bad neighborhood? Too close to a busy street? Was it built on a steep hill? These factors will allow you to pay a discounted amount, but they may make it difficult for you to sell when the time comes.

Unexpected costs could ruin your profits. To be certain there are no surprises, make an appointment with an inspector while the contract is being finalized. The inspection report will spell out problems that you already are aware of but, occasionally, it will inform you about a new one. This process helps ensure that you identify and assess all difficulties, understand repair costs, and line up workers to make the repairs. Most importantly, it provides an opportunity to reopen negotiations and ask for additional discounts to cover unexpected repairs.

"I don't think anyone should get into house flipping based simply on the glamorized picture television portrays," concludes Frank. "That's almost a guaranteed recipe for problems--very costly problems."

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