When I make an investment, whether it is in real estate or in another field, I like to have my money to work as hard as it can for me. For real estate, it means investing in properties with high yields. The yield is simply the ratio between the total rent during one year, divided by the total invested money.
In this article, we are going to see what is a high yield in real estate, and then how to invest in high yield properties. We will see that there are many ways to get high yielding properties, and we will see how crowdfunded real estate can really help you achieve that. Let’s start!
My First Buy-to-Let Experience, and What is a High Yield
In order to define what a high yield means in real estate, let me tell you the story of the first flat that I acquired years ago. I bought it for 115.000 euros, and after I found a tenant for the flat, it was renting for 620 euros per month. Honestly, I thought it was very good, and I was satisfied with my investment for a good period of time.
But now let’s look at the yield. If we calculate the yield for this property, we get a yield of 6.5%. It was only when I spoke about this investment on property forums that I realised it was actually quite low for a property investment. I learned that even for this kind of buy-to-let apartment, the yield could be as high as 7.5%, or more in several areas. Therefore, I started looking for ways to get a much better return on my next property investment.
Investing in Areas with the Best Returns
The first thing you can do to get higher yields for your property investments is simply to invest in areas that are well known for higher returns. That was for example not the case at all in the area where I bought my first buy-to-let property.
In Europe, it is the case in some parts of the UK for example, where you will have properties yielding at 7 – 7.5%. You will also find such yields some cities in the Baltic states, like in Estonia.
The problem is: how to invest in those areas if you are living far away? Well, that’s where real estate crowdfunding comes into play. Not only does that solves the remote management problem, but it also makes it much easier to invest. By buying a property, you will usually need to go there, spend time there, and finally make the deal. With crowdfunded real estate, investing in a property at the other end of the globe can take just a couple of clicks.
High Yield Property Investment with HMOs
Another way to invest in high yielding real estate is to invest in HMOs. HMO stands for House in Multiple Occupation, basically a house or flat which is occupied by several people having individual leases, and sharing some parts of the property.
Because you have several leases on a same property, those properties usually yield much higher than if you would put a single occupant in the property. You can expect a yield in the range of 8 to 9% with such properties, sometimes even more.
Using real estate crowdfunding helps here as well. If you are starting out in property investing, you usually won’t be able to afford a house big enough to be used as an HMO. However, real estate crowdfunding will allow you to invest in such a property with a limited amount of capital, as you will be buying the property with other investors.
Investing in Mixed-Use Real Estate
Finally, another great way to get high yielding properties is to invest in mixed-use real estate. This means that it’s properties which are part traditional buy-to-let residential, and also part commercial. For example, it could be a house with a mobile repair shop on the ground floor, and two apartments on the upper floors.
Just as HMOs, because you have several different leases for a single building, this will raise the yield of the whole property compared to other similar properties. Having commercial tenants also means longer rental contracts, which means more stability for you.
Using crowdfunded real estate also really helps here. Not only a new investor won’t usually be able to buy such a property, but it also removes the hassle of having to deal with professional tenants.
Do you know another way to invest in high yield properties? Please share below!