Buy

For many buyers, the phrases "handyman's special" or "needs TLC" in a home listing are synonymous with the term "money pit." But for savvy homebuyers that can see beyond a home's present condition, a fixer-upper could potentially yield some profits down the road. If you've found a home that needs some renovation, ask yourself these questions before placing a bid:

• Is a fixer-upper worth salvaging?
• What is the home's current and potential value?

Cosmetic improvements like new wallpaper and kitchen cabinets, or structural repairs like a new roof or rewiring are much different than gutting the entire first floor. Know what you're getting into and how much mess you can tolerate. If a little drywall dust doesn't bother you, but living in your basement for six months would, look for a dwelling that needs less extensive work.

If you've mortgaged less than what your home is worth, a home equity loan could pay for improvements. Low-interest government loans might cover renovation costs as well. Estimate your monthly costs for the mortgage and other loans, and make sure you can swing payments for both.

You may thrill at the idea of nailing shingles on a rooftop or re-plumbing the bathroom. On the other hand, if you hire a handyman whenever your living room needs repainting, factor in labor costs for even simpler improvements.

As with all investments, those that have the greatest potential for payoff are also the riskiest. But that's what appeals to some buyers. A smaller outlay now could yield big rewards later, if you're willing to take that chance.