With the current market, I've been getting quite a few people interested in buying and fixing up properties. Here are some tips on this approach.

The First Time Buyer’s Guide to Buying a Fixer Upper

How to get in the property ownership game.

Self evaluation—what construction skills do you have?  Be critical and hard on yourself.  Make a list of what you can do and what would need to be outsourced.  Basically, determine how much sweat you have, and what your sweat is worth.  You don’t want to sweat a lot, have poor results, and have to hire someone to redo, or finish your project.  Also, factor in your available time to work on projects.

Get pre-approved.

Set a preliminary budget — What you are willing to spend on acquiring the property not what you’ve been pre-approved for.  Your life will be incredibly easier if you embrace the idea of looking at fixer uppers and don’t even bother looking at the top price range of what you’ve been approved for.  If you look at the top of the range then you will have no negotiating room, or budget to fix what needs to be fixed up without a further construction loan, and you’ll have no reserve for accidental expenses. 

Then, what you are willing to spend on adding to that property, and how you can live for two years in a less than perfect property. 

What tools do you have?  Actually, go to a Home Depot and just look from isle to isle and get a general feel to what lighting, plumbing, bathroom fixtures, kitchen fixtures, etc. and tools cost.  This will help you look for the right fixer upper. 

Make a list of all items that are required for you to live in a property.  Be very specific.  If you have a four person family you may need 4, 3, or 2 bedrooms.  What appliances do you need vs. what you like to have?  Also, decide on if you want a single family or duplex.  Again, do you have the skills to be a landlord, maintenance worker, and salesperson?  Do not get set on a project idea or architectural style at this point.

Look at a map and visit the areas where you may like to buy.  Look for amenities and neighborhoods where you can tolerate to live.  There is an old piece of real estate wisdom that says, “Buy the smallest, worst house in the right neighborhood.”  Unless you are just buying to get into the right neighborhood don’t do this.  That house is the smallest and worst for a reason and it is probably a functional flaw and not one that can be solved by adding granite counters, or fixing it’s foundation.  When the market goes up—that house maybe too small, the wrong lay out, next to a gas station, etc.  It will appreciate when the market goes up but not like the rest of the neighborhood will.  A bigger house in a lesser neighborhood may appreciate more when the market goes up. 

Find a realtor that is willing to drive you around.  You can do a lot of searching on the internet however limit your search to price, location, size, etc.  Most of the property photos are taken by realtors and highlight the ‘best’ features determined by the listing agent.  These photos will not tell you about condition, smells, neighbors, noise, actual size, etc.  You have to physically see many properties.  Also, in buying a fixer upper that has sat on the market is not a bad thing.  You cannot have the attitude “Well no one else wants it neither do I.”

Once you have a list of properties and are ready to go and view them, bring a notepad, pen, flashlight, and tape measure, work gloves, and a screw driver.  Oh, and be sure to wear shoes with thick soles. 

Next: How to evaluate property