Question: Ok, I know about the positives of the business but can you give me a list of the potential downfalls or losses you can suffer while trying to make this business work?

Answer by Jeanette Joy Fisher

Potential Downfalls or Losses You Can Suffer Flipping Houses

I'm sure other investors have many horror stories to share. Most of the losses can be bypassed with knowledge. Here are some potential problems to consider.

1. Paying more than you need to for financing. If you have perfect credit and great income, why use a mortgage company that charges high fees and extra fees?

2. Paying too much for a house that needs too many costly repairs can strip away any and all profits. You must know how much the property will sell for and how much the repairs will cost. Plus, you must be prepared for surprises that come up like a broken pipe flooding the house. This happened to us once. The new carpet had to be raised up and dried but it didn't mildew. (Our daughter ended up buying the house and she's had no problems with the carpeting.)

3. Buying a house in a bad neighborhood can cost profits. One investor lost all of his tools when someone broke in. If you're unsure about the neighborhood, install an alarm. Add this cost into your estimate of expenses before you make an offer to purchase. Make friends with the neighbors so they watch over your property.

4. Understand that it may be difficult to get insurance on a vacant house for longer than one month. We often allow a single college student to stay in our houses. They get the use of one room at a time. They can use the kitchen and other rooms but not keep any personal possessions in those areas.

5. Keep insurance that protects you from frivolous lawsuits. Monitor any day laborers so they don't make a foolish mistake and get hurt.

6. Watch your back and don't show the house to unverified buyers. Some real estate agents have been killed showing houses.

Share your losses with us in the comment section.

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