This installment follows Rehabbing Manual Step 1.
Once you figure out where you want to do your rehab, then you need to pick your property.
The first thing that you need to do in the selection process is to set your priorities. What are the deal killers and what are the deal makers. That will allow you to quickly cut through a lot of marginal properties.
For us, we wanted more space than we had currently (easy), a passable space for a garden (at least 20'x5' of decent sun), off-street parking, and some minimum level of security (remember we've already figured out what areas we were OK with living in). There were a lot of pretty places that otherwise fit but we could quickly move on once we saw that there was no chance of off-street parking. We could also determine likely/unlikely properties with a google map. That would allow us to see the exposure and possibility for a garden.
Other factors you might want to prioritize are room for kid(s), nearness to schools or amenities, and similar issues.
Another thing to consider is your hard boundaries for the work. If there are things you simply can't or won't do, you need to keep that in mind to quickly eliminate candidates. You should also have a pretty good bead on how big a project you can manage. Can you only do some renovation, but not a full gut? That changes the type of property you can manage. More care must be taken when you won't be doing a full gut, if you hope to stay on budget. There are lots of stories about folks who fall in love with huge mansions and they end up slaves to the project. Sure, they can buy them for a song, but the work involved, even if not extensive, becomes overwhelming when the house is huge. Often the choice becomes either living in dust and construction debris for years, or going way over budget. Don't overreach. The house is supposed to make your life better, not wear you down to a fine paste.
One absolutely key factor to consider is overall quality of the home. We decided that we wanted a brick Victorian. This is because they are rather simple and tend to be pretty sound, and are so common here and that there are lots of folks who have experience working on them. The first thing you look for is soundness. You want good straight walls with NO bowing. Get your face up close and look along the wall for bows. If you can't easily see, get up on the roof with a plumb bob. Look for settling. Take note of any cracks and their nature. Some settling is fine, but if there's a lot, call in an expert to evaluate it. In fact, you should have a trusted evaluator go through your rehab candidates with you. Find someone who has some experience with these old homes. Many things (like a bit of water in the basement) freak out inspectors or folks who are new to old homes, but aren't a big worry.
Check the floor beams from the basement for insect damage. A little is probably OK. Over a century or so, bugs might have infested a place and then been dealt with. If the damage is minimal and not ongoing, it's probably fine. If there's extensive insect damage, you probably want to pass. Also, can an awl and poke the floor beams at the foundation. Look for signs of rot. Again, a little isn't horrible. A lot rot can be a big problem--especially if you're not doing a full gut. Repairs of a few joists is easy. Hidden water damage, however, can get very costly, if you're trying to retain as much of the original work as possible. There's a continuum of easy and hard to deal with issues that changes relative to how much restoration you intend, vs. how much removal of old material is planned. Water damage in a wall you intend to remove is irrelevant, after all.
Do check to see if a property you like is in a historic preservation district. If so, get in touch with the historic preservation officer and fine out what is allowed and what isn't. Get a good grasp of the general guidelines. If you know what you can and can't do and the general cost factors, you'll be able to determine more readily which properties are uneconomic and pass on them. Nothing is worse than buying the property and making plans, only to have them shot down by historic preservation and zoning.
Next: Rehabbing Manual Step 3: Estimating