Are you considering making a real estate investment with a modest down payment? Or are you exploring the advantages of commercial versus residential property investments? We spoke with Robert DeFalco, Owner of Robert DeFalco Realty, to gain insight into the fundamentals of real estate investment for first-time buyers.
The real estate industry has experienced remarkable growth, standing at a staggering $370 billion. Despite a setback during the pandemic, the industry has found its footing again and is set to flourish at an annual growth rate of 3.72% until 2025.
Timing-wise, now is an opportune moment to invest in properties. However, it is essential for investors to have a basic understanding of the real estate industry before venturing their capital.
The type of property investment a person chooses is vital and depends on factors such as desired return on investment (ROI) and investment horizon. Robert DeFalco explains that the choice of property differs depending on whether a person intends to sell in three years or hold onto the investment for the next decade.
Residential properties form the bedrock of the American real estate market. They offer investors a quick route to profitability, though success hinges on employing the right strategies tailored to specific markets. DeFalco emphasizes the importance of working with an experienced real estate agent familiar with the local market.
While many might envision single-family homes or duplexes as residential investments, there are various other options to consider. Vacation homes provide short-term rental opportunities with variable ROIs based on location and seasonality. Multifamily apartments and condos are attractive solutions for investors with more capital to spare.
DeFalco highlights several property investment strategies within residential real estate:
- Buy-to-Let: Investors purchase properties with the intention to lease them to tenants, either as residential or student rentals.
- Off-Plan: This strategy involves buying properties before completion, often at below-market prices, with the potential for capital appreciation.
- Houses of Multiple Occupancy (HMOs): HMOs are properties with multiple rooms rented to different tenants, making them suitable for students and other demographics.
- Flipping: Flipping houses entails buying properties, renovating them, and selling for profit.
- Vacation Let: Properties rented for short-term vacations offer varying ROIs depending on location and seasonal demand.
On the other hand, commercial real estate presents diverse investment opportunities and encompasses properties leased by businesses and corporations. Commercial investments typically involve higher initial costs and ongoing maintenance but offer the potential for substantial returns through higher rental incomes. One advantage of commercial real estate is longer lease terms, providing investors with a more stable and reliable income stream.
There are two common methods of investing in commercial real estate:
- Real Estate Investment Trusts (REITs): REITs allow investors to invest in real estate through stocks. They reduce investment risk and provide liquidity by allowing shares to be traded on the stock exchange.
- Crowdfunding: Investors participate in real estate investments through non-traded REITs, which can offer higher ROIs but come with increased risk and potential illiquidity.
Raw land, consisting of undeveloped or vacant land, is a popular yet often underappreciated type of property investment. Investing in raw land or new construction on raw land can yield excellent ROIs and long-term income streams if executed correctly. Investors seeking stable and long-term income may find residential or commercial property investments more suitable, while those willing to take on higher risks for potentially larger ROIs may opt for raw land investments and new construction.
To successfully navigate the complex world of property investments, it is crucial to seek guidance and expertise. Robert DeFalco Realty, home to a team of trained and experienced real estate agents, can provide the knowledge and skills necessary for both residential and commercial property investment.
– Interview with Robert DeFalco, Owner of Robert DeFalco Realty