(Before & After of a recent project)
What is your "BRAT?" (Budget, Resources, Abilities & Time)
Prior to beginning your search for an investment property, you must decide how much of each of these you have, and what you are willing to provide towards this new investment endeavor.
Budget is obviously how much you can or are willing to allocate towards a investment property.
This is not just how much you have, but also what is reasonable. For example, if houses in excellent condition in a neighborhood are selling for an average of $100,000 and you find a home that needs work, selling for $80,000 are you willing to put $30,000 into it for repairs? What if the house is selling for $50,000 are you then willing to put $30,000 in repairs? Do you have $30,000 available for the needed repairs?
Who is going to do the needed repairs? Do you have a list of reputable vendors that will do the work quickly and inexpensively? Do you have friends or family in various businesses that would be willing to help you on a weekend? These are still resources. Even your own experience in doing other house flips in the area can be considered a resource.
What about your own abilities? Sometimes there are investors that move into an ugly house, and fix it up, sell it and start all over again. Many of the basic upgrades and repairs that do not need a licensed professional can be done by the homeowner if they have the ability to do these things. I have met many people that have an over inflated sense of their abilities (I am guilty of that myself from time to time) and this has cost them thousands of dollars. If you can take an unbiased evaluation of your abilities and apply it to what is needed for this property under consideration you may be able to bring the amount needed for repair down to a level more in liine with your available resources.
That goes into the next item on the list: "Time"
Personally, I always seem to have more time than money or more money than time, but rarely both.
While evaluating this property and your resources and your abilities, be sure that you have the time available to take on this new project. Even if you have reliable vendors doing the work instead of yourself, I have found that the best results are when I randomly drop in on the property while they are working and do a basic inspection of the quality. Even if they are known to perform high quality work, when they know that you will be checking, corners don't get cut as often.
If you are thinking about doing the work yourself, do you have the time needed? If not, you may have a house that is sitting for months on end, losing money instead of making money, simply because you over promised your time and attention to this project.
While most of this is unfortunately learned through trial and error and gained by experience, here's hoping that you will at least take a moment and learn from some of my more epic mistakes that always seemed to be when I bit off more than I could chew at the time.