Real estate investments are so popular right now but there are a lot of misconceptions about them. People tend to think that they’re a sure thing and as long as you’ve got the money to invest in a property, you’re guaranteed to see a good return. While it’s true that there are a lot of people making good money from their real estate investments, it’s not true that it’s easy and everybody is guaranteed to make a quick buck.

If you’re going to find success with real estate investing, you still need to make sure that you’re going about it in the right way and doing your research first. Buy the right property and you stand to make a lot of money but if you buy the wrong property, you stand to lose a lot. If you think that real estate investment might be a good option for you, these are some of the best ways to increase the return on your initial investment.

Choose The Right Location

Location is key when buying property as it has a big impact on your ability to rent a property out for a good price, and the value of the property over time. If you buy a house in an undesirable area that is falling out of fashion, the value of the house is likely to decrease and you won’t be able to find tenants to fill it. A lot of people assume that all properties will appreciate in value because house prices are on the rise but that isn’t the case. If you’re going to make good money from your investment, you have to choose the location wisely. For example, luxury homes in Los Angeles are a sensible investment because it’s a desirable area. You won’t have any trouble finding tenants and if you want to sell the property on in a few years, the price is very likely to have increased. People aren’t going to stop living in Hollywood or Beverly Hills anytime soon after all.

Looking for neighborhoods that are up and coming is a good strategy as well. If you have the foresight to spot an area that is going to become very popular in 5 years time, you can buy a property there now while the prices are still reasonable and wait for the value of your investment to increase. There is more risk doing it that way but as long as you consult a good real estate agent and take their advice, you should be able to make an informed decision.

Consider Tenants First

If you’re considering a buy-to-let investment, you should always start with the tenants and work backwards rather than buying a house and then thinking about what kind of tenant is going to live there. For example, if you’re looking at a location where a lot of young working professionals live, you’d be better off going for a one bed apartment over a three bedroomed house. Think about the kinds of people that live in the area and what their housing needs are, and then find properties that fit those needs. You’ll find it a lot easier to get tenants in if you do it this way.

Screen Tenants Properly

The bottom line is, if people don’t pay their rent on time then your profits suffer. The majority of tenants won’t give you any trouble but there will always be some that don’t pay on time every month. That’s why screening tenants properly is so important. Always make sure to get references from previous landlords and if there is any history of missed payments there, you should consider going elsewhere. You also need to think about how they will look after the property because if you’re constantly spending money on repairs and redecorating after they move out, that will eat into your profits as well. As long as people have good references and they can pay a deposit upfront, you shouldn’t have any problems.

Rent Single Rooms

Renting single rooms can be a very good way to maximize the profit that you get from a property, but there are some downsides and it will only work in certain situations. If you are buying a property in a college town, for example, you might be able to rent single rooms out rather than renting the property out to a family. You can usually charge a higher rate doing it this way, as long as you make sure that you put some investment into creating good communal areas.

Real estate investment can be incredibly profitable but it’s important that you don’t get complacent and assume that it’s a sure thing, because it isn’t.