Despite all the glowing reports you hear about flipping real estate on reality TV shows, flips do flop. Take the case of an investor who purchased a $550,000 home in Boise, Idaho. The investor planned to make minimal improvements and resell the property within a month for $600,000.

“Both my partner and I had informed him this house was outside of his cash-flow ability,” explains Troy McClain, who in 2004 competed to land a job with developer Donald Trump in the first season of The Apprentice and is now president of The McClain Co., a real estate investment firm in Boise. McClain discouraged the purchase — the investor could afford the mortgage payment for only three months — but the investor went ahead because he had a “for sure” buyer who’d take the house off his hands within 30 days.

“Of course, the ‘for sure’ buyer was not for sure at all,” says McClain. “There was no contract in place, and the ‘for sure’ buyer bought another house and left our investor with a large house and the inability to cover the monthly cash flow.”

In the end, a potential $50,000 profit transformed into a foreclosure action. “The biggest mistake most flippers make when assessing a possible deal,” says McClain, “is they count only the upside and never add into the equation the possible down side.”

Even so, it’s hard to resist juicy TV shows that feature confident real estate investors turning ugly duckling homes into showpieces — and reaping huge profits in the process. So when you nestle into the couch with a bowl of popcorn to enjoy such programs as Property Ladder and Flip That House on TLC, Flipping Out on Bravo and Flip This House on A&E, remember that the drama on screen often doesn’t reveal the full story. Here’s what flipping programs don’t tell you about those seemingly quick, easy and profitable real estate deals.

One of the biggest investments in flipping real estate isn’t money. It’s the legwork it takes to find a viable investment property.

“That’s really the secret to success. If you don’t buy the property correctly, it doesn’t matter how efficiently you fix or sell it,” says Than Merrill, a flipper featured on A&E’s Flip This House and president of Fortunebuilders in New Haven, Conn. “Only about one in 25 properties for sale are truly a great opportunity. So about one-third of my time is taking calls, running comparable sales, figuring out the value of the property compared to what the seller is asking, and determining whether the property is a good deal.”

Market foundations, please

Part of that analysis includes evaluating market conditions, another factor that’s seldom discussed in detail. “Did investors have economic indicators that contributed to them having the margins necessary to flip profitably?” asks Andy Sachs, a real estate agent with Coldwell Banker in Newtown, Conn. “How were they able to buy — through a foreclosure or short sale? It’s the economic temperature of the area and the home purchase that we don’t know about.”

Those conditions can make or break a deal. For example, McClain was recently offered the chance to purchase for $1 million a home valued at $5 million. He took a pass. “I had to consider whether I could afford the payment on a million-dollar loan,” he explains. “Even if I could, I had to factor in that the average time on market for a $5 million home is 24-36 months in Boise.”

In addition, while TV programs reveal the investor’s purchase price, they don’t disclose whether that’s the contract price or whether it also includes closing costs, such as prorated real estate taxes. “Closing costs can run from $3,000-$25,000 depending on the state the property is located in,” says Dale Siegel, an attorney, real estate investor and owner of Circle Mortgage Group in White Plains, N.Y. “For example, if the annual property taxes are $30,000, you might have to come up with another $15,000 to $20,000 at closing.”

Beware fuzzy math

The shows do sometimes explain that the process of getting permits for renovations can create delays, but they don’t explain that permits cost money — sometimes big money. In many areas, the cost of permits is based on the cost of the work that’s planned; the more work, the more expensive the permits. They also gloss over carrying costs for such expenses as utilities. “The average carrying costs for things like heat and electricity are just as if you were living in the home, especially if somebody’s there every day doing renovations,” says Sachs.

The big profits investors crow about at the end of each episode can also be deceiving because there’s no explanation of the tax implications of the investment. Depending on the state you’re in and how long you’ve held property, you may have to pay capital gains and state income taxes. And profit from a flip may push all of your income into a higher tax bracket.

“Most people are in a 23 percent income tax bracket,” explains McClain. “If you earn $75,000 on a flip, you’ve just pushed all of your income into a 40 percent tax bracket. So that $75,000 profit is probably only about $30,000 in profit.”

One thing all the experts agree on is that, unlike on the tube, flipping doesn’t always have a happy ending. “People think investing in real estate is a lot easier than it is,” says Siegel. “These shows always tell you how much money investors made, but they rarely tell you how much they lost.”