5. Flipping Homes is Riskier

Before the real estate bust, flipping homes was all the rage. Buyers would purchase a home, paint the walls, upgrade the kitchen and resell it a few months later for a profit. Now, even though there's a glut of temptingly affordable homes on the market, flipping can be even more risky, says Leonard Baron, adjunct professor of real estate investing at San Diego State University. The home could linger on the market for months or even a year before it sells and in some cases, the owner will have to turn the property into a rental in order to cover the mortgage. Also, many buyers underestimate the cost of renovations – especially in foreclosed homes that have been gutted. As a result, they risk paying more than they budgeted for renovations before selling the home.

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