Buying a "handy man special" can be a great way to earn sweat equity, but it also can turn into the proverbial money pit.

In the best scenario, the house just needs a fresh coat of paint, some minor repairs and a new bathroom. You could spend $500 to $10,000 remodeling the house, get into a prime neighborhood and still come out ahead.

Here's what to watch out for:

• major structural problems, such as cracking foundations, sloping walls or floors. In some cases, you'll need a structural engineer and a contractor to fix these issues
• a leaking roof, particularly if it has been leaking for awhile -- may be causing rotting wood, mold inside walls
• choppy floor plans that won't allow expansion without major structural changes, such as having to rip off the back of the house
• in some cases, outdated electrical and plumbing systems -- because of the safety aspect and the cost. Everything can be fixed, but at what price?
• a fixer upper on a busy street -- When you go to sell it one day it will still be on a busy street. If this is the only way to afford a great neighborhood and you plan to stay there for a long time, it can be viable, however.
• a house that is the biggest and most expensive on the block. It is much safer to take the smallest house, provided the property is large enough for future expansion. This leaves room for your investment to increase in value when compared with nearby houses. Or, if you to sell the house quickly, you stand a better chance of getting your money out of it.

Here's what you want:

• a solid house with sturdy construction -- the walls and floors should be properly framed and supported so they will provide a good foundation for any additional work. Look for clues in the basement ceiling and walls
• a location considered "good" or better -- Houses in stable neighborhoods that are part of good school districts are the best investments. Stay away from neighborhoods where property values have declined, the school district is having financial problems, or there is a problem with crime.
• neighbors who care -- look around the neighborhood for signs that the owners take care of their properties. Do you see people tending to their gardens and mowing the yard?
• good nearby infrastructure -- shopping, schools and transportation that is close, but not too close. Commercial properties that are well maintained and have nice landscaping. Nice parks or other recreation.

Remember, you might have to sell this house some day. All the elbow grease in the world will not make a declining neighborhood look good to future buyers.