Many people already realize that it makes a lot of financial sense to buy a house that's undervalued and develop it to increase its value for resale. These fixer-uppers can really be a great real estate investment especially in a buyers' market. However, there are some risks that are not worth taking. People who make bad investments on houses that require too much to get fixed end up losing more money than they will ever hope to make out of the property.

Investing on a fixer-upper in a good location.

If you find a potential fixer-upper but it's located in a bad neighborhood, it's not going to be a very good investment in the long run. It's better to find a small house sitting on an oversized lot within a good neighborhood. Such houses can be repainted or expanded or you can add structures (like rooms or a pool) outside it because the lot is spacious. Or you can find a house that you can make a project home as long as it's in a neighborhood that doesn't look like it's going to turn into a really bad neighborhood in a few years. Even if you have the best-looking house in a bad neighborhood, the value of your home will still suffer.

Should you buy an old house?

Old houses in historic neighborhoods certainly has its own charm. Buying an old house, however, requires specialized maintenance. Not to mention that old houses have old problems. For example, if you are in the market for Gilbert real estate and you find an old house while shopping for Gilbert houses for sale. Old houses seem to have so much more character to them, and this really catches your eyes. However, you have to be realistic with the kind of investments you make. You may need to have a lot of things to repair, like the foundations, the heating, plumbing, electrical wiring, and the likes. Of course since it's an old house, you'll have to find ways to maintain it without damaging it yourself.

Ideal improvements to look out for.

Ideally, you should look for a house that would only need a fresh coat of paint, some landscaping around the property, replacing fixtures and countertops and the likes. You can look at homes with a lot of room inside it which you can remodel to add an extra room in. Creating an extra room adds significantly to the value of the house. An oversized lawn can make a great home project. You can construct a home office outdoors or add a treehouse or a shed. Such improvements add value to the real estate and spotting houses like this have the potential of helping you make money off it in the future.

Is the basic floor plan of the house workable?

Try not to look at a home in terms of what it would look like if you break down the walls and opened up the space a bit. Unless you have a lot of extra money to undertake the project right away, the house's floor plan would probably stay the same while you pay the mortgage off. It's important that you are happy with the original floor plan so that you can live in it even without major renovations yet.