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Flipping houses is not as easy as it sounds

Tuesday, February 5, 2013 - 12:01 am

Q.: Why is buying bankrupt property a high-risk endeavor? I think it sounds clever. I understand the property is often sold very cheaply. – Reader in Missouri

A.: I can think of many words to describe buying bankrupt property, but "clever" certainly is not one of them.

While it is true that property is sold cheaply and can be flipped, the practice is sophisticated and fraught with possible dangers. For example, when you buy the property, you often are given little, if any, time for an inspection. Many hidden problems may not come to light until after the property has been purchased. A faulty heating or cooling system could cost many thousands of dollars to fix. The property often is sold at auction, and unless you have complete control of your faculties, you can be induced to pay more than the property is worth.

If you wish to go into this enterprise, do your homework and go to some auctions. Find out how they are conducted. You must set a limit on how much you will spend and, when that number is reached, you must drop out of the bidding. It's important that you invest

Send questions to or to Smart Money, PO Box 7150, Hudson, FL 34674. Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.