According to published reports from major media outlets, the real estate industry has encountered a recent surge in "property flipping," buying property and reselling quickly for a profit.

The phenomenon promises a quick return on your investment. It portends to be a fast turn over. It promises a lower purchase price and upwards of 20% profit in a very short time.

The wise investor should carefully assess the claims promoted by slick advertising campaigns on the internet, television, and in print media. Working in the designing and building industry has given me a front row seat for witnessing this phenomenon. It is very interesting to examine the inner workings of some house flipping programs, as well as to uncover the actual experience of many uninformed participants.

It is true that an opportunity exists for quick economic gains in these transactions, but there is a dark and ominous side to this type of investment opportunity. This article will highlight two of these perils. The first has to do with the true property value as opposed to the represented opportunity. The second peril has to do with the time involved in preparing the turn-over for a new offer at a higher value. The latter peril is the most dangerous to the unsuspecting novice investor and in some cases the more seasoned investor.

The first potential pitfall in flipping involves accurately estimating and appraising the value of the house, both for initial purchase and for post-rehabilitation sales. Any error in your estimates, or worse, bad estimates from an unscrupulous appraiser, could devour your potential profits or even land you in jail.

The second pitfall involves the potential delay in property turn-around. The ultimate sign-off from municipal agencies is often a process that can take as long as six months to two years to complete. Unfortunately, the old adage "Time is Money" couldn't be truer when flipping. The question you need to ask yourself is: Are you prepared to undertake the financial burden a delayed timeline may incur?

As part of ADC Limited's continued effort to educate our membership, an introductory seminar on house flipping was presented via sponsorship of 1st American Title Company. The realtors and investors in attendance were provided with a capsule of information on assessing the pros and cons of real estate flipping opportunities.

A couple gave an unlicensed individual a $30,000 deposit, without obtaining a written contract, to build a three bedroom, two bath unit onto the rear of their home for $90,000. Although the proposed project was located in a city known for rigidly adhering to building requirements, plans were neither drawn nor approved. One year later, the couple was still trying to get plans drawn and approved for the project and were hoping the unlicensed individual would return to finish building their dream. Meanwhile, the unlicensed individual was reported to have gone to Alaska , where he was allegedly helping his son add-on to his house.

Fortunately, ADC Limited, LLC professional staff was able to revive the project and get the clients on track with plans and a realistic cost control mechanism.

Yes, these scams do exist and unsuspecting families are abused. The complete case study is on file in the ADC Limited office.

Don't forget our upcoming monthly seminar being held at the Woodfin Suites Inn July 15, 2006. Click here for the flyer and sign-up online.

A new web-stream will be available August 1, 2006 on our website:

www.adcbuilderseminar.com