Checklist: From 'Dump' to Dream House

Jan. 12, 2007 — -- It's a buyer's market with many homes ripe for the picking. But can you maximize your investment by purchasing a fixer-upper?

Barbara Corcoran, "Good Morning America's" real estate contributor, says you can. She recently visited Andrew and Janine, two homeowners who just bought a fixer-upper in Baltimore, Md.

Check back for Andrew and Janine's video blog updates as they renovate their home.

Below is a checklist with Corcoran's tips on how to turn a house from a "dump" to a dream. If you're thinking about getting a fixer-upper, save or print this page to use as a guide.

First, pick a perfect city to buy a dump. For example, Baltimore, Md., is one of the fastest-growing U.S. cities because people have been priced out of homes in Washington, D.C. Look for areas like Baltimore to buy a fixer-upper.

Make sure the house is structurally sound. It should have a good furnance, a working gas meter, working electrical wiring, running water and stable stairs. It's OK if it's the ugliest house on the block. If all the other houses are renovated, the fixer-upper will still have great curb appeal.

To decide if a dump is the right financial option, ask yourself, "What would I have to pay if it was renovated?" Make sure there are no back taxes or hidden liens on the property. The Baltimore homeowners bought their dump for only $145,000. If it had been fully renovated, they would have had to pay $275,000.

To begin turning the dump into a dream house, focus on the parts you'll have to look at each day. Budget carefully. Replace fixtures and flooring. Realize that some renovations will take longer than others: a gut renovation of the kitchen will take longer than pulling up carpet to expose wood floors.

Once the dump has become a dream house, figure out the home's new value. The Baltimore owners plan to put $27,000 into their fixer-upper. Once the house is revamped, they can sell the home for at least $100,000 more than they paid. The new value of their renovated house will be $260,000, working out to a $102,000 profit.