If you're considering investing in rehabilitated residential property, you're making a smart choice. Real estate values have been climbing at the same time demand for homes has been increasing — an impressive combination.

Considering flipping a house?

Often, people and companies that sell rehabilitated real estate buy a run-down property and put a lot of money and sweat equity into it to make it attractive to a buyer. They reap the reward when the property is sold for a lot more than what was originally paid for it. There's nothing wrong with this. In fact, it makes more housing available at a time when it's in demand. And it's often a good investment choice for the eventual buyer.

Know the risks

Before you invest in a rehabilitated property, you should obtain a professional appraisal, from an appraiser with your interests in mind. Normally an appraisal needs to be performed on behalf of the lender, by an appraiser working closely with sellers, brokers, and agents. Too often, homes are "flipped" for considerably more than they were paid for – without any substantial improvements to justify the higher price. You're the one left holding the bag. Shouldn’t you have someone on your side making sure your money is being invested wisely?

Protect yourself and your investment

It's easy to protect yourself: Hire a professional appraiser to ensure the property has had improvements that justify the asking (or agreed upon) price. If you're buying more than one property at a time from the same buyer, it's even more important to have them appraised by a professional working for you, instead of another party to the transaction.

There are cost effective ways to protect yourself in an investment into many properties. We perform "drive-by" appraisals, sanctioned by housing giant Fannie Mae, which can be more economical than a full appraisal with an interior inspection. When combined with the expertise of a licensed home inspector, you can buy confidently, knowing that everything is as represented by the seller.

It's smart to always have an inspection done before closing on a property, but it's equally important to obtain an opinion of value from an appraiser. An inspector will tell you if everything that is present in the structure is functioning properly, what repairs may need to still be done, and whether there are any safety or soundness issues with the property. An appraiser can translate that into dollars. After rehabilitation, is the property worth what it's selling for? If something unexpected happened and you needed to sell right away, would you be able to recoup your investment?

As an investor, you need and deserve to know. Protect your interests with the help of a professional appraiser.