You are in good company if you have recently purchased some real estate for investment purposes. Recent reports suggest that nearly 25% of these purchases have been made by those who plan on using the property for investment purposes only. If you hope to “flip” the property there are 4 things you must be aware of that can put a crimp on your profits.

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1. Property Taxes. Hold on to the property for some more years and you may have to withstand a sudden increase in property taxes particularly if reevaluation of your taxes takes place during that time. In just 5 or 6 years taxes have nearly doubled in some hot real estate markets.

2. Renovation Expenses. You may have purchased a “fixer upper” at a bargain rate. Once your project is complete will you be able to recover the expenses and make a profit especially if the value of your renovated property is above those in your neighborhood? In addition, can you withstand a correction in real estate values?

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3. Insurance and Mortgage  Costs. Homeowners insurance cost will be higher for you if you do not occupy the residence and you have tenants. If you are financing the property you know that your mortgage rate is higher as well.

4. Rental Pressures. A market saturated with rentals is an indication that the rents that you can charge will be less than what you had thought you would receive. Special licensing is required in some markets for you to be a landlord. In other markets the legal rights of tenants could mean you’ll have to go through a lengthy and expensive battle in ridding yourself of a bad tenant. Will the lower income levels coupled with additional expenses drag your investment down?

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Of course, you can limit your risks [and costs] by doing the majority of the upgrades yourself, appealing excessive property tax increases, and finding for yourself a trusted and dependable tenant. It isn’t easy flipping a home, but with a lot of pluck and determination it can result in strong profits for you.