We recently read an article about a man from Nebraska who decided to try to "flip" some houses upon retirement. He was able to purchase a house for $30,000 and do the work himself. This property is now listed at $72,000. That sounds like this could be a pretty good return on his investment. If you could do a few houses a year like that during your retirement, you could have a nice little side income.

The problem for this first-time investor came after the repairs were done. It was in the form of a tax bill of $1,300. We have included a link to the newspaper article that you may read. A short summary is that this man has been caught in a bureaucratic glitch. He has gone to the assessor to fight this amount which really is not his to pay. He is finding no resolution there.

This article says that this may be this man's "first and last flip" because of this problem. As frustrating as this may be, there are going to be instances in the house renovation business such as this. Any time that you deal with houses, there are unanticipated situations. It may come in the form of unfair bills or tenants who leave in the middle of the night. (We've definitely had both of those things happen in our 15 years in this business.)

As an example, we were recently told that we needed to have piers put under a house in order for it to close. That cost us $1,000. We honestly don't believe that the house needed these two piers. Had we wanted to fight it, we could have stood on our principles that this repair was totally unnecessary. Instead, we went ahead and paid it so that we could close and make our profits for this project.

You have to do a cost benefit analysis of issues to decide if "standing" is worth it. How much time and energy (a.k.a. money) has this man wasted fighting City Hall? Is the tax unjust? Absolutely! However, he could have been spending that time buying more property from which he could have made a profit of 10-20 times the $1,300 tax. What's your priority? What's your plan?

We are not advocating just rolling over and paying whatever comes before you. We try to carefully scrutinize everything. On the other hand, pick your battles carefully and decide which ones are worth your time.

You should have a contingency amount built into your remodel budget for every project -- for everything from carrying costs to sudden repairs. There will always be something unexpected that arises and an experienced investor should be ready for these times.

http://www.theindependent.com/stories/01242008/new_mainnews24.shtml - link to the article