Inspired by exuberant [tag]real estate[/tag] pundits and late-night TV pitchmen, many homeowners may now be convinced that [tag]home flipping[/tag] is a better investment than the [tag]stock market[/tag]. But advocates of a nothing-down, double-your-money-in-a-year strategy often fail to mention potential pitfalls. There are obvious downsides — failing to budget properly and overspending on repairs — but the bigger hazards include market volatility and unforeseen tax consequences. As a result, brokers and accountants who work with flippers say that for every smart investor such as King, there are dozens who lose their shirts or, worse, their savings.

Topping the list of pitfalls is the sheer unpredictability of the market. Former film editor Bill Brame, a Westwood, Calif., real estate agent who has flipped homes since 1989 and has several such clients, recalls how the market turned on him when he least expected it. After starting out with a couple of homes, Brame had created a virtual empire by the early ’90s. He had 14 houses going at once, with three crews of renovators working full time to rebuild cracked foundations, repair leaky roofs, paint, plumb and generally transform fixer-uppers into top-dollar properties. Then, in 1993, the market took a dive. Unable to keep up with mortgage payments, Brame was forced to sell most of his homes at a loss and lay off his crews.

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