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What Are High Yield Real Estate Investments

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.


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