how do investors in expensive markets make money?

[Arthur Schwartz]

Or do they simply put more down, say 35% or more, to reduce the mortgage payments and bring rents and expenses into line?

[Russell Brazil]

Yield is a measure of risk in the asset and or market. Lower risk markets, such as DC, Boston, etc will have much lower yields than high risk markets such as Baltimore, Detroit etc.

If ones goal is higher yield upon initial purchase, then a low risk market may not be their investment of choice.

However actual total returns in lower risk markets have historically been much higher than the high risk markets. Both through asset price growth and rent growth. My sfh homes in Montgomery County have averaged rent raises of $100 a month per year over the last decade. In DC proper that number would be higher over that time.