When a house is a fixer upper, people start thinking complete tear down and rebuilding from the ground up to resell at a profit. Unless you are already a contractor or in the contracting business, it is not recommended to take on such a big undertaking as your first starter home.
Look for cosmetic upgrades such as old rugs and wallpaper instead of crumbling foundations and beams. Major structural fixes are both expensive, time intensive and unpredictable (a 2 month project could turn into a 10 month headache) which could easily drain your funds and mental energy quickly.
Even with minor to medium fixes, remember that you will be one managing all the different people coming and going while they are working on your house for you. Will you be okay with eating takeout and delivery for a month or two while contractors are renovating your kitchen?
When you have a chance to remodel, stick with what sells and not a full out entertainment center in the basement with hot-tub seating. Aim for the modern upgrades that everybody loves, so your home will get a large amount of potential buyers when you are ready to upgrade and sell. Consider the resale value of the finished product before doing any out of the ordinary renovations that don’t capture future buyers’ interest.
For homes in very bad shape, it is recommended to look into 203(k) type loans specifically for property rehab. This type of loan is only for owner-occupied homes, and is not available for investors.
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