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First thing is that the notion of ‘Buy, fix, sell' is not a sure-fire formula for massive profits. Don't be seduced by the promise of fast money. If it was easy everyone would do it! Adding value to property can rapidly increase your wealth. But no, it is not a miracle cure or a 'get rich quick' scheme. Your results will ultimately depend on the amount of time, dedication and effort you're willing to commit.

If the real estate mantra is ‘location, location, location', then it should be ‘research, research, research' for buying investment property. 90 percent of the battle (and 90 percent of your time) is locating and purchasing the right property. So do your research, view properties, negotiate, then research some more.

There will be times when, despite your meticulous research and planning, the property doesn't sell. Prepare for external influences beyond your control with an exit strategy. For example, be willing to rent the property for twelve months if the market isn't favorable when you're ready to sell. There is no shame in holding a good property. But more importantly, never enter into a project if you don't have an exit strategy and be flexible to take on viable alternatives to your strategy.

It seems like a no-brainer to do the work yourself instead of paying a professional. You end up with bigger profits, right? Well, not necessarily. First of all, how professional is your workmanship? Substandard quality can and will affect your resale price. If you're not so good at it yourself (perhaps you done have the tools, patience, and skills), pay an expert to do it.

You've heard the saying; you make your profit when you buy the property, not when you sell the property. The added value from the renovation is icing on the cake. Research your market well. The potential selling price must be attainable after taking all costs and profit margins into consideration. Never let yourself be ruled by your emotions when buying. Keep your purchase price sufficiently below market value to at least allow for the buying, selling and closing costs, and for the rehabbing costs as well.

In any business venture, cash flow is king. What good is a potential $30,000 profit if you can't pay your bills? Do a few projects to build up your cash reserves before you rush out and quit your job. Insufficient cash flow could lead to you to get multiple part time jobs!

When rehabbing a house, keep the style simple, neutral, and give it 1 or 2 "wow" factors. A home sells quicker and for a higher price when it possesses strong buyer appeal. Notice here, that your décor needs to have a buyers appeal not your own appeal!

The great temptation of rehabbing is doing too many "unnecessary" renovations. While the "wow" factor is critical, you must keep your emotions in check and stick to your budget, allowing a buffer of 10 to 15 percent to cover any surprises. Always prepare an accurate estimate of costs before making an offer. There is no definitive right or wrong strategy in the rehab business. You need to know your own abilities and threshold for risk. The objective is to obtain the biggest bang for your buck in the shortest possible time and with the minimum amount of cash.

Also, there are tax liabilities in rehabbing a house especially for part time rehabbers. These beginning investors, not knowing the tax implications, sell their property after holding it for almost a year. Some rehabbers work part time to fix a house, taking 5 months, and another take few weeks to get the house ready. Add on a few weeks to sell with a 60 day closing, and they're up to ten or eleventh months. To take advantage of the low 15% capital-gains tax rate, you must keep the investment property for at least a year before selling. If you sell before a year, your tax rate, the usual capital gains rate of 35%, could reduce your profits. So hold on to your property just a few more weeks to save yourself thousands in taxes.

Once you understand that things can and will go wrong in this business, you are better equipped to avoid the pitfalls. The information is from experience and lessons learn over the years and not meant to be legal advice. Please seek legal advice through your local attorney.