H ouses that need a lot of work -- fixer-uppers in the trade -- can be great deals or money pits. Whether you are looking for an investment property to fix up and sell or a home you can lovingly restore, here’s how to buy wisely...

Don’t be put off by cosmetic problems. They make a house look run-down but are relatively easy and inexpensive to fix. These include peeling paint... broken windows... a poorly maintained yard... stained, smelly carpets... broken bathroom fixtures... even holes in the wallboard.

Because these problems are obvious, many potential buyers are scared off and sellers tend to set low asking prices.

Beware of major problems. These are not always visible and can be expensive to repair. Replacing a heating system can cost $3,000.* Central air-conditioning repairs are potentially even more costly. Replacing plumbing or updating an electrical system could run $5,000 to $10,000. A new septic system or well ranges from $2,500 to $10,000.

Avoid homes with major structural problems, such as roof or foundation damage or major dry rot. These problems tend to be extremely costly to fix, and sellers rarely come down far enough to make the purchase worthwhile.

A new roof costs $10,000 to $20,000. Replacing a foundation can run $25,000 to $100,000.

Important: Any offer you make should be contingent on a house inspection. Cost: $200 or more.

Find homes in desirable areas. The better the area, the better the resale value. Look for communities with several renovation projects in progress. Or find the one poorly maintained home in a nice area.

Negotiate wisely. To get the best deal...

Avoid falling in love with any particular house. The key to buying a fixer-upper is finding the right property at the right price. You have to be ready to walk away. Don’t be surprised if you make offers on as many as 10 houses before you ink a deal.

Know the value of comparable homes in the same neighborhood. A real estate broker can provide this information.

Calculate your costs. Your offer must be low enough so that you will recoup your renovation costs (including potential cost overruns).

If you are fixing up the home as an investment to resell right away, figure in a profit margin and your resale costs. I usually figure 10% of the resale price for purchase and resale costs and at least 10% for profit.

Do not be afraid of insulting the seller with a lowball offer. The worst he/she can say is no.

Never leave your offer on the table for more than 24 hours. The seller will simply use it to bargain with other potential buyers while you twist in the wind. If the seller won’t come down far enough, move on.

*Prices are based on Robert Irwin's research and may vary widely by state and type of house.