Fixer upper homes are those that are in need of repairs, remodeling, and general restoration. Buying a fixer-upper home is one way to make a profit in the real estate market. To make a profit you need to buy a suitable home and take smart steps. A good place to start is by looking at foreclosures. Foreclosures are usually in less than perfect conditions and are typically 30% to 60% below possible value. It’s not easy, but prices can be negotiated even lower, depending on how long the house has been on the market.

Check into remodeling loans if you buy a fixer upper. Not every lender offers remodeling loans, but some do; here’s how they work: The bank’s appraiser comes to the property and evaluates its current value along with the probable value that refurbishment will bring. The loan will be for all the restoration needed. Purchasers must prequalify and if they get the loan, the appraiser stops by during the remodel to check progress and approves of ongoing remodel funds until the project is complete. Then they reappraise.

The first step in making money in real estate fixer market is buying in the best location you can afford. Avoid high-traffic area of business, busy streets, shabby neighborhoods, and homes bordering schools, and you’ll improve resale value. A great find in a bad location won’t sell; will make all your restoration work worthless. Experts aren’t joking when they say location, location, location.

Stick with fixers that only need cosmetic repairs. Search for a great layout that doesn’t need walls ripped out to create openness. Look for a layout that flows comfortably where rooms aren’t choppy. The less you have to do structurally, the less money you’ll spend. Get at least two bedrooms and preferably two baths or more.

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