It’s the homebuyer’s dream: Dig up a rough diamond in the perfect neighborhood, buy it for bottom dollar, and flip it into a gem worth double what you paid.
But sometimes that diamond in the rough is actually a money pit in disguise. The key to getting a steal is knowing how to tell them apart.
“Buying a fixer-upper can be fraught with peril,” says This Old House. “Before you take the plunge, make sure you have a realistic idea of what you're getting into.”
If you’re looking to pay bottom dollar, take a hard look at your local market. Deep discounts are possible in some areas—especially those with expensive homes—but most fixer-uppers list for an average of 8 percent less than market value, according to Zillow. For the median buyer, that leaves about $11,000 for repairs.
Many homeowners do the work themselves to save money. If you have the skills, you can maximize your investment. But ask yourself some hard questions about the amount of work and the time commitment involved.