What Are High Yield Real Estate Investments


High yield real estate investments are investments that offer excellent returns on your money. There are a number of programs offered by companies nationwide that specialize in helping people to secure investment property that provide great returns. They include private lending and private alternative investment loans. These are private loans provided to real estate investors that offer high yield and low risk using the note as well as a deed of trust secured by real estate. Those investors typically use first or second mortgage to secure their legal interest and also their investment funds.

Some lenders use low loan-to-value ratios with high yield low risk investors in order to improve the security of the loan. Those LTV ratios are often between 60% and 75% of the property’s value. This adds security to the investment funds. Some high yield real estate investment funds use conservative investment principals as well as meticulous underwriting standards and are based on the belief that developing real estate offers a better return on investment than banks and the stock market. The goal of many companies is to offer real estate that offer yields in excess of 12% annually.

The strategy some companies use to get high yield real estate is to target sectors with artificially depressed real estate prices because of lack of available credit. They also look for sub-sectors where there’s less completion, invest in core markets that have intermediate and long-term high growth trends and purchase real estate that offers high cash-on-cash yields during the hold period. They also purchase real estate that will appreciate in the immediate and long term because of a dislocation between home ownership and renting. These companies analyze properties one by one looking for the best deals with using a buying formula.

Companies are able to offer high yield real estate investments because they buy real estate from distressed sellers where institutional capital is non-existent. These companies systematically source, manage, buy and rehab properties in under-served communities and produce huge dividends. They look for real estate with unlevered cash-on-cash yields of over 9% from rental operations. Properties offering cash-flow yields to investors of between 14% and 16% and purchase prices reflecting a 77% discount on replacement costs and houses that will sell for 4 times as much on average are the target.

High yield real estate investments are a way for investors to be able to almost guarantee they’ll make money in the long-term. Still, investors must remember there is some risk with high yield real estate and do their due diligence. They must also be realistic, pay attention to the details and understand the cause and effect relationships inherent in the real estate market. They should understand how and why a particular real estate investment is able to offer such a high yield. The investor should also understand how things like economic conditions, industry competitors and financial operating conditions could affect the return on their potentially high-yield real estate investment.

However, there’s great rewards for people investing in high yield real estate. It offers yields much higher than treasury securities and other safer alternatives. Many have great success with real estate investment trusts. These can be private or publicly traded and offer people the opportunity to invest in a broad or narrow real estate portfolio and claim the rental income.

The Essentials of Investing

What is investing as opposed to saving?

There’s a broad line that sets apart savings from investing.  When you set aside funds for the near-term, it’s called saving but allotting funds for the long-term, it’s investing.

In short, saving is just postponing a purchase or acquisition.

money-1604921_640Short-term time deposits, savings account, money market placements are good channels to put in money that you want to access immediately when needed.  Buying a family car, vacation packages, or paying for household emergencies are short-term needs usually funded from these accounts. The return is minimal but you’re assured of getting the principal once needed.

Goals that are long-term in nature such as setting aside funds for college education and retirement require purchasing assets proven to yield a higher return on investments (ROI).

While stocks and bonds are examples of such assets which you can purchase and hold for longer periods, financial planners advise diversification of investments.

Now that you got a glimpse of what investment is, it’s time to understand why it’s so important.  Below are four top reasons:

Reduces uncertainty

A financially secure individual has fewer uncertainties when it comes to financial stability.  You have cash reserves and are empowered to make investment decisions.

Helps achieve long-term goals

Future plans like buying a new home, sending kids to college, and building a retirement fund are future goals you want to accomplish.  To do this, you need to put your money in the right forms of investment.  The appropriate type will depend on your goals and your timetable.

Builds wealth

There are many investment options available in the market that will help you grow your money.  Bonds, stocks, and mutual funds are some of these options that could help build wealth within longer time frames of around seven years and beyond.

Shields you from inflation

Inflation devalues your money and so with your savings. Prices of goods and services keep on increasing every year.  Investing shields you from decline or loss of capital whenever prices soar.  A good way to fight inflation is to invest in assets that assure an ROI that’s higher than current inflation rates.  Equity investments are one such investment type that yields higher-than-inflation-rate ROI.

Whatever long-term goals you have set for yourself, remember that investing will always be an essential tool for achieving success.


Reaping the Benefits of Investing in Real Estate

Real estate is one of the preferred investments for it offers a lot of benefits.  Investors are assured of a steady ROI and acts as a hedge against inflation. It is one of the most flexible investments with satisfactory returns for those who know how to manage them well.

What follows are three benefits of investing in this type of asset.

Provides a steady stream of cash flows

If there’s one top advantage real estate investing has, it’s the stream of income that follows after purchasing real property and renting it out.  Owning a property and having it leased to a good tenant is one of the best ways to derive income.  Just be sure that the lease payments you’re getting would be more than enough to cover property taxes, insurance, repairs, mortgage, and related expenses.  The net amount you get after deductions is your monthly income.

Whenever your leased property produces satisfactory yield, you can use the same money to purchase another income generating property.  If managed wisely, a portfolio of leased properties can pay for themselves.

Space requirements whether for residential or office is growing constantly.  This alone makes purchasing real property a very solid and sound investment.


Can be purchased thru financing

painting-1770211_640A lot of banks and financial institutions offer mortgage loans payable over long periods of time – some may offer 30-year loans.  Of course, you have to pay the interest.  But when you consistently pay your monthly loan amortization, you get closer to paying your property in full.  Every month, your principal loan is reduced.  At the end of the loan term, you will have fully paid it.

In essence, you have actually purchased and eventually owned a property using other people’s money.  This won’t happen with other investments.

A useful piece of advice though is to ensure you maintain good credit standing.  A poor credit history can affect your chances of getting a loan.  You should be able to present a good credit image so pay all forms of debts on time.  If you do this, you’ll get instant access to a mortgage loan and invest in a property in no time.

Property prices appreciate

Properties in prime areas tend to appreciate fast.  Purchasing ones that are located in sought-after communities is a wise investment.  While we all know that prices of real estate could also go down, over the long term, it will still increase in value.  When property prices decline due to a slack in the economy or oversupply,  prices will always make a rebound.

It is a hard asset, therefore it protects owners from economic conditions like high inflation.  It becomes a hedge during hard times.

Investing in real estate is a top investment vehicle that will leave you reaping a lot of benefits.  It allows you to accumulate income without necessarily coughing out a lot of your own savings.

If managed wisely, you reap the benefits of investing in real property for life.


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The Essentials of Investing

What is investing as opposed to saving? There’s a broad line that sets apart savings from investing.  When you set aside funds for the near-term,...