But...

Not every fixer is a diamond in the rough! Some places just can't give you the benefits you need to make money. Some owners will think think the value is much higher than you do, or they owe too much on the property to sell at a reasonable price. Some places just aren't layed out right, are structurally unsound, or are in an area that won't attract decent tenants. Some places just don't justify the fix-up costs for the return.
The ideal property needs no major layout change, is functioning presently as a rental, and just needs updating, a good cleaning, and possibly new tenants. These are things easily fixed, that almost anyone can do themselves without a contractor or permits.
We also look for basements, separated utilities, parking, and good fire separation between units. Bonuses are big ticket items that are already done, such as roofs, HVAC, electrical, etc., that can kill the budget!
We are not beyond major reno's if the return is worth it, but remember, you are a real estate investor not a contractor!

Run Down? Check!

"welcome"

Dirty? Check.
Smelly? Check.
Ugly? Double check (tenants and property!).
This property seemed to have the right things wrong to make a good cash flow deal. Good location and layout are secondary (but still important) to a great buy, but ugly and dirty are what is going to get you flexibility in price and terms.
You need to learn the skill of looking beyond the dirt, need for updating, and deferred maintenance to see what it will look like after fix-up. This takes practice, but once you have this ability you are well on your way to getting ahead in the cash-flow game!
This is from Julie Broad, in my opinion one of the best "Gurus" we have here in Canada:

the biggest goldmine for you as a buyer … you (hopefully) can see what a clean up and a little updating can do to a place. Few other buyers can.

I Love Tenants

No, that is not sarcasm. Our tenants make us rich. And they ask so little in return (well, most of them anyways...), a clean, safe, maintained place to live.
Your landlording skills are probably the most important skills to learn to become financially independent, ahead of choosing properties, negotiating, etc.
Not learning good landlording skills can destroy your real estate investing dreams (and your property!) pretty quick. If you absolutely can't deal with tenants, you could hire a property manager, but I recommend managing your first few by yourself. This way you see what it's all about and who knows, you just might realize it's not so bad after all! Your fear quickly disappears when you become familiar with it, and learn the applicable landlord-tenant legislation for your area.
Or you can do what I did - marry an awesome property manager!

Don't Be A Slum Lord!

Not that I don't love slum lords...It's because of them I've found some of my best deals! Namely power of sales and huge discounts due to huge problems with both the tenants and the property.
Milking a property by accepting the income but not putting anything back in is not only bad for business, but gives all landlords a bad name.
When you wan't to sell, (or are forced to!) you will have to sell at a discount due to the properties problems, that is if you can sell at all!
When I say I buy crappy fixer rentals, I don't mean they stay that way. We fix the issues (tenant and building) and can get decent rents because we make it a decent place to live. We usually figure on 10-20% of purchase for fix-up costs.
You can't get something for nothing...if you are going to accept the rents, accept the responsibilities as well.

Why?

I was in my early 30's on my way to my middle management job when suddenly I can't talk. Everything seemed like it was a foreign language that I couldn't speak or understand. What the hell? Drove myself to the hospital emergency and stared at the receptionist until she walked me in to an exam room. Doc checks me out, and orders an MRI. Brain tumor.
Shit.
Stay at home wife, four kids, no life insurance, no savings, no RRSP...
I needed the quickest (legal) way to increase my almost non-existent net worth and provide an income for my family, and I only had a few years to do it in (my predicted lifespan). After looking into the most obvious choice, real estate, I formulated a plan.
I would buy dirty, crappy fixer rental units, clean and fix them up, rent them out to good tenants, and refinance them so I could buy more.
Why buy fixer rentals? Lotsa reasons, but the best one is THE MONEY! Ya, the reason we all got into real estate investing is all about, like Kevin O'Leary always says, "the Money".
The reason you can make lots of money with fix-up rentals is that you can buy 'em cheap! You can also get all kinds of great terms from the seller (mostly because nobody else wants to buy them!). Were talking heavy discounts, owner financing, flexible closings, etc. If you're the only offer the seller has had, chances are good he'll take what he can get! You can then force up the value, and make huge amounts of instant equity which you can then refinance.
Well I did it! 14 years later and still going strong (thanks in large part to my ultra low carb diet!) and enough cash flow to not just survive, but to enjoy life, as well as a portfolio of properties valued in the millions. I won't say it was easy, but with motivation, it is possible!