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They say that anyone can be a stockbroker in a rising market, but the true professionals come out in a down market. So it can be said for real estate agents and the “flippers”. If you believe the hype the you see on TV, your road to riches lies on the path of buying homes for “NO MONEY DOWN”.

But the true professional flippers will tell you a completely different story. You need to understand many different aspects of real estate and constructions, and even then the market can bite you in the proverbial behind if houses stop moving or prices drop significantly. Plus all of the “NO MONEY DOWN” people sitting with you at the courthouse steps bidding up properties and taking all of the profitability out of a potential deal.

“Most people who are newcomers to flipping get into it kind of like it’s an art project, and they spend too much money and try to impress their friends,” said King, 61, who lives in Sunland, a community of horse properties north of Burbank.

Inspired by exuberant real estate pundits and late-night TV pitchmen, many homeowners who have watched prices appreciate by double digits for several years may now be convinced that home flipping is a better investment than the stock market. But advocates of the nothing-down, double-your-money-in-a-year strategy often fail to mention potential pitfalls. There are the obvious downsides — failing to budget properly and overspending on repairs — but the bigger hazards include market volatility and unforeseen tax consequences. As a result, brokers and accountants who work with flippers say that for every smart investor like King, there are dozens who lose their shirts or, worse, their savings.

“If you really know what you’re doing, you’ve got a good chance of making money,” said Mike Teer, president of Teer One Properties in Riverside and agent to several successful home flippers. “But if you aren’t on top of your game, you can get taken to the cleaners.”

Topping the list of pitfalls is the sheer unpredictability of the market. Bill Brame, a Westwood Realtor who has flipped homes since 1989 and has several such clients, recalls how the market turned on him when he least expected it.

Read the rest at the  Los Angeles Times.

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