If you know the price level at which property in your area is selling, you can instinctively recognize a good deal. Of cause, with experience you will also come to know the general parameters of prices in which you can make the most money. However, even when you find something within your range, it doesn’t mean you should slap down a deposit right away.

First, find the right property. There are many ways to do this. One way is to work with agents. Their formal obligation is to represent a seller but in doing so they must present the seller’s property to all potential buyers. If you remain close to agents as a potential buyer for any and all properties that fit your criteria, they will let you know of potential good deals even before they get on the Multiple Listing Service (MLS) public market. Another way is to prospect directly for signs and searching the newspaper advertisements for sellers. All of these methods should be used to find possible deals. Your goal is to have a constant flow of property that fits your criteria.

Second, inspect the property. You need to make a comprehensive inspection of the physical characteristics. Pay particular attention to location, size, and general condition. From this information you can do a quick market analysis as to its value. Make a detailed list of needed repairs. Are they due to the owner’s negligence or because of its age? Are there obsolescent features? The work may be as simple as general cleaning and repainting or as extreme as reproofing and upgrading kitchen and bathrooms or adding a dormer. The point here is that you need to have a good idea of what to expect – you don’t want any unpleasant surprises, so be thorough.

Third, estimate repair costs. Investigate the cost of whatever needs to be done. Do this by expanding on your inspection list – determine what must be done, what is required by the local building inspector, and what you should do to make the property more marketable. Decide what you want to do to make it look better – the cosmetic repairs. Once you have a list of what should be done, price it out with carpenters and contractors, or subcontractors and handymen so you know exactly what your repair cost will be in order to determine the price you will offer.

Fourth, look at comparable. One of the key factors in your success in the fixer-upper market will be your ability to determine value of the property, not only going in but what you can sell it for after you’ve bought it into shape. You do this by finding property comparable to your subject property, imagining that the latter is all fixed up. Why not find comparables as the property is now, without work being done? Because you need to know your end price – that is, what it will sell for once the work is done. It may seem backward, but it’s not. It directly targets your profit and allows you to lay out just what will happen in each stage of the deal.

Fifth, determine offering price. You do this by taking the estimate of final value, subtracting your profit (up to 20%), subtracting repair costs, and selling and overhead costs (another 8% to 15% respectively), and arriving at a must-not-go-above price. From there you wish to offer a downward amount, as your seller is likely to counter with one higher. Your offering price, then, is one that includes your profit after all expenses are taken care of, including the property.

Sixth, negotiate the deal. Negotiation is about getting the property at a price that includes your profit. Once you know what you can safely pay – the price that ensures your profit – make a workable offer, perhaps one that the seller is not likely to accept but close enough that it doesn’t insult him or her and gives you an opportunity to go up. You will need to negotiate with the seller or agent for several important factors beyond price, including financing, length of time before closing, and assignability if it may be your desire to wholesale the property to another. Have in mind several clauses ready to go that protect you as a buyer. You can have a preprinted “offer to purchase” form when you are working with a seller directly, or you can just add the substance of the clauses on the agent’s form.

Seventh, arrange financing. Obviously you will know in a general way how you will finance the purchase before you finalize the offer. You may have lined up a bank that has pre-qualified you for a mortgage. Or you may be asking the seller to carry the mortgage until the repairs are completed and the property resold. Or there may be third parties providing financing on a short-term basis. Whatever form financing takes, once you have agreed with the seller, you can complete he financing arrangements. Note that although you always want to ask the seller to carry back the mortgage for you, not all will be able to do so, and you don’t want to lose a good deal if he or she can’t. Therefore, if you can pre-qualify yourself with a conventional mortgage source, you will reduce running around at the last moment. So know your options in advance and be prepared.

Eighth, close and take title. Formally take title t the property by closing the transaction correctly. Stay in touch with your attorney – and you should always use one – one exact figures. It you’ve done your homework, problems at the closing will be infrequent, but they can happen and you need to be prepared. Using a knowledgeable attorney, as well as having an accountant who can participate, can make for a smoother closing.