Buying a fixer upper can be a smart way to build equity fast—if you know how to tell a great opportunity from a costly mistake. Here are seven rules to help you find homes with real potential and avoid the ones that drain your wallet.

1. Separate “Dirty and Dismal” From Real Problems

Don’t let appearances fool you. A stained carpet, strange wall color, or overgrown yard can all be fixed for a reasonable cost. But signs of mold, water damage, or structural issues usually point to bigger and more expensive repairs.

2. Compare Carefully

Two homes can look identical on paper but differ greatly in long-term costs. Always factor in the age and condition of major systems like heating, cooling, and water heaters. Sometimes a cheaper home that needs replacements right away can actually be the better value.

3. Know Your Remodeling Limits

A little paint and new hardware can go a long way, but not every “quick fix” holds up. Be realistic about how much renovation you are willing and able to take on before the project becomes overwhelming.

4. Get Real Numbers, Not Guesses

Don’t rely on rough estimates or verbal promises. Get actual bids from licensed contractors so you can budget accurately and avoid surprises later.

5. Walk Away From Unknowns

If you cannot determine the full scope or cost of a repair until after closing, that is a major red flag. Unless you are comfortable taking that risk, it is better to move on to the next property.

6. Always Get a Professional Home Inspection

An unbiased inspection can uncover hidden issues before you buy, saving you thousands and giving you peace of mind about your investment.

7. Expect the Unexpected

Older homes always come with a few surprises. Add at least 20 percent to your renovation budget to cover unforeseen repairs and keep your finances on track.