Are you curious about the possibility of making a real estate investment with a modest down payment? Or perhaps you’re weighing the advantages of commercial versus residential property investments?

We sat down with Robert DeFalco, Owner of Robert DeFalco Realty and the number one real estate sales agent in Staten Island, to dive into the basics of real estate investment for those seeking to make their first purchase.

The Current Landscape

The real estate industry is an ever-growing market. While the industry took a hit during the pandemic, it has found its footing again. It's now standing tall at a remarkable $370 billion, with a promising future ahead, set to flourish at an impressive annual growth rate of 3.72% until 2025.

With such incredible growth, now is the perfect time to invest in properties. However, investors should have some basic knowledge of the real estate industry before putting their capital at risk.

Choosing the right type of property investment is crucial and depends on several factors, such as desired ROI and investment horizon.

DeFalco explained, “I’m not going to recommend the same kind of properties if you’re looking to sell in three years than if you’re looking to hold these investments for the next decade. There are many factors we take into consideration.”

Residential Property Investments

As DeFalco elaborated, there are different types of property investments and each has its pros and cons. Residential properties are the cornerstone of the American real estate market.

“These properties offer a quick avenue to profit for investors, although success hinges on deploying the right strategies tailored to specific markets,” said DeFalco. “Enlisting the services of an experienced real estate agent can be invaluable because they tend to be well-versed in their own markets.”

There are various types of residential property investments, and many might initially picture single-family homes or duplexes (which consists of two separate housing units within one building), but there are many more options to consider. For example, vacation homes offer short-term rental opportunities that can yield variable ROIs based on seasonality and location. For those with more capital to spare, multifamily apartments and condos might be a more interesting solution.

Per DeFalco, investors can explore the following property investment strategies within residential real estate:

Buy-to-Let: Investors purchase properties with the intent to lease them to tenants, either as residential or student rentals. “The choice between residential and student buy-to-let depends on the target demographic,” said DeFalco.

Off-Plan: This strategy involves buying properties before their completion, often at below-market prices, with the potential for substantial capital appreciation.

Houses of Multiple Occupancy (HMOs): HMOs involve purchasing properties with multiple rooms and renting each room to different tenants, making it suitable for students and other similar demographics, such as business people who travel often for work.

Flipping: Flipping houses entails buying properties, renovating them, and selling for profit, with one cautionary caveat. “This strategy requires a deep understanding of real estate and can be riskier compared to other options,” said DeFalco.

Vacation Let: Properties rented for short-term vacations offer varying ROIs depending on location and seasonal demand.

Residential Property Investments

On the other hand, commercial real estate presents diverse investment opportunities and primarily comprises properties leased by businesses and corporations.

“While commercial investments typically involve higher initial costs and ongoing maintenance, they offer the potential for substantial returns, primarily through higher rental incomes,” said DeFalco. “One distinct advantage of commercial real estate is the longer lease terms, providing investors with a more stable and reliable income stream. Two common methods of investing in commercial real estate are through Real Estate Investment Trusts (REITs) and crowdfunding.”

Crowdfunding is how investors participate in real estate investments through non-traded REITs, which can offer higher ROIs but come with increased risk and potential illiquidity.

The different types of commercial properties include industrial buildings, such as warehouses, hotels, banks, offices, and retail stores, and Real Estate Investment Trusts (REITs), which are businesses that own real estate and offer investors the opportunity to invest through stocks.

“REITs reduce investment risk and provide liquidity by allowing shares to be traded on the stock exchange,” said DeFalco.

Raw Land Investments

Raw land consists of undeveloped or vacant land, and it’s a popular, yet often underappreciated, type of property investment. This category includes various land types, such as vacant land, working farms, and ranches. 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 with a consistent ROI may find residential or commercial property investments more suitable,” said DeFalco. “In contrast, those willing to take on higher risks for potentially larger ROIs may opt for raw land investments and new construction.”

Expert Guidance for Property Investments

In closing, investing in real estate requires a profound understanding of property investments, market dynamics, and cost-minimizing strategies. For those lacking such expertise, seeking guidance is essential.

Robert DeFalco Realty, home to a team of trained and experienced real estate agents, can provide the knowledge and skills necessary to navigate the complex world of both residential and commercial property investment.

About Robert DeFalco

Robert DeFalco Realty was founded in 1987 by Robert DeFalco, a real estate Broker/Owner who wanted to help families achieve their dream of homeownership. Through the philosophy ‘Treat People Well,’ Robert DeFalco has grown into a successful real estate agency led by a professional team of highly-motivated real estate associates with experience in residential, commercial, and new real estate development. For more information, please visit http://defalcorealty.com/