Its commonly believed that fixer-upper properties represent easy money that is ripe for the taking - that you can buy it, do a little work on it in your spare time, and then resell quickly for a large profit.  Usually, this simply isn't the case.  Although, with proper planning and foresight, good profits can be made by buying "distressed" properties at less than market value, making appropriate improvements and repairs, and then reselling.  And for many first time buyers who intend to live in the house while working on it, buying a fixer-upper can be the very best option.  Its less risky buying a fixer-upper when you can live in the house while fixing it.  And of course, by living in the house for at least 24 months you should be able to avoid paying regular income taxes on the profits.

The most important thing to know before making a decision on such a purchase, is what needs to be fixed.  Any time you are spending money on improving a home with the notion of selling it later, strive to spend your money on things that buyers can easily see.  Things like new paint and removing trash from the property cost little but have instant impact on curb appeal.  Houses that have only cosmetic problems like peeling paint, a trashy yard, bad carpet or wallpaper are the best bet.  This is especially true for the first time buyer looking to live in the house for a while before reselling.  Fixing and cleaning cosmetic issues is fairly easy and inexpensive; it virtually always gives gives a good return on investment, particularly when you can do the work yourself.  Kitchen and bathroom remodeling usually pays a nice return.  Don't be afraid of buying a fixer-upper in need of this kind of repair.  Properties with structural damage, or a floor plan that requires major work to remedy, usually can't be "fixed up" at a profit. 

Always have an inspection done by a professional home inspector or a construction professional to reveal any hidden damage that the property may have, before buying a fixer-upper.  Make sure that satisfactory completion of such inspections are a condition of the purchase in any contract you sign.  Then be sure to negotiate to try and get the seller to pay for all or part of the cost of needed repairs revealed by the inspection.  Often, sellers will be willing to lower the sales price to sell the home "as is" instead of paying for the repairs.

Be careful that you don't over pay for the house.  Especially if you plan to resell it quickly; paying too much upfront can doom your plans for quick a profit.  Research the market for reselling activity and comparable sales, and have an exit plan for selling the house in place before making an offer.