Fixer-uppers are hard to resist. You buy a house that needs work for less than a median home price, repair it, and either sell it or live in your dream house. In the end, you will have either saved or profited thousands of dollars. It is much harder than it sounds. Fixer-uppers aren’t for everyone, and some are just plain bad deals. Here’s when you know when it isn’t worth it.

Do A Cost Analysis

Make a complete list of everything that needs to be fixed on the property and then estimate how much each job will cost to complete. If you don’t know, you can look it up online or have contractors look at the job. Make a spreadsheet of all the material and labor costs that fixing up the property will take, and add an additional 10% for unforeseen problems. Estimate the house’s market value after renovation and subtract it. The difference is your profit.

Do An Inspection

The real estate contract should also have an inspection clause. Hire the best inspector you know and check out the property for problems. They might be able to detect something that you and your team can’t. When all is said and done, you will know whether the project is worth it. 

Weigh The Pros And Cons

The next step is to determine what type of work to focus on. Some work gets valued by the market and leads to an increased market price. Some work is invisible and doesn’t get priced in. Significant structural improvements, such as plumbing, foundation upgrades, electrical system overhauls, and wall and roof work, are considered invisible because they do nothing to raise the house’s value and offset their cost. If most of the work you’re going to be doing is hidden, it’s not going to be worth your time to take on the job. The best changes are cosmetic, such as paint, drywall, refinishing floors, lighting fixture, window shutters, and updated kitchens and bathrooms. A house is a prime candidate as a fixer-upper if there is a lot of room for improvement in these areas.

One thing you need to keep an eye on is not to over-improve the property. You should not raise the value of a house above 10 or 15% beyond the median sale price. The house will be overpriced for the neighborhood and be hard to sell.