Real Estate Investing News and Advice!

Welcome to your source for real estate investing news, insights, and guidance.

As industry experts, we stay up-to-date with real estate market trends, and actively work to stay ahead of changing market conditions. We’re excited to share our research and analysis with you! With these market insights, and real estate investing tips, you’ll have a competitive advantage over other investors in your local market.

The topics we cover include real estate news, interesting market trends, buying and selling real estate, and managing rental properties. We also share company news from Gatsby Investment, so you’ll have the inside track as Gatsby continues to expand operations.

Want to learn even more? Click the links to view educational articles, press releases, and explainer videos.

Why Now is the Perfect Time to Invest in Real Estate with Gatsby Investment

As we navigate through a dynamic and ever-changing real estate market, it’s essential to recognize that every phase presents unique opportunities for savvy investors. While it’s true that real estate has faced some challenges in recent years, these very challenges create prime opportunities for investors.

At Gatsby, we pride ourselves on our ability to adjust to market changes and remain well-positioned in the current market with a strong focus on what's in demand. 

Here’s why now is an excellent time to invest in real estate through our syndication platform:

1. Buying Low in a Buyer’s Market

Real estate markets are cyclical, and we are currently experiencing a period where property prices have stabilized or even decreased in certain areas. This "buy low" phase is crucial for investors looking to maximize returns. When property values are lower, we can secure high-quality assets at a fraction of their future potential value. This sets the stage for significant appreciation and sale value as the market rebounds.

2. Diversification and Risk Mitigation

Investing through a syndication platform offers diversification that individual investments may lack. By pooling resources with other investors, you can invest in properties with a lower minimum amount and build a diversified portfolio of properties. This spreads risk across multiple assets and locations, reducing exposure to any single investment.

3. Inflation Hedge

Real estate has historically been an effective hedge against inflation. As prices for goods and services increase, so do property values and rental rates. This means that real estate investments can provide a safeguard against the eroding purchasing power of your money. By investing now, you position yourself to benefit from this inflation protection, ensuring your investment retains its value over time.

4. Consistent Demand in Los Angeles

Every city can be in a different stage of the real estate cycle. Los Angeles is currently experiencing a shortage of homes and a significant need for particular housing types. This consistent demand and growth make LA a resilient real estate market. Gatsby Investment has a specific focus and extensive market knowledge in Los Angeles, ensuring we can navigate and capitalize on this dynamic market. Our expertise allows us to identify high-demand properties and secure strong returns for our investors.

5. Strategic Property Development

The demand for rental properties remains robust, especially in high-demand markets like Los Angeles. With rising housing prices and changing lifestyles, more people are opting to rent rather than buy. Gatsby focuses on strategic property development, creating multi-family properties with large, more affordable units that cater to the needs of today’s shared-living renters. Our developments are designed to meet the growing demand for rental properties, ensuring strong and stable returns for our investors.

6. Utilize Our Relationships and Connections

Gatsby has established a strong reputation in the industry and is a market-leading company in Los Angeles. This allows us to access off-market deals, set favorable prices, and negotiate terms that individual investors might not achieve alone. We benefit from volume discounts on deals, labor, and materials. Additionally, our longstanding relationships with lenders enable us to secure favorable interest rates.

7. Technology-Driven Platform

Gatsby uses proprietary software to allow investors to access unique investment deals, stay organized throughout the process with regular updates, streamline operations, and manage projects in volume. This automation lowers overhead costs and leads to faster completion, ultimately generating higher returns for investors.

Discover Investment Opportunities with Gatsby!

At Gatsby, we believe in the value of investing across all market phases, recognizing the opportunities each phase presents. There is potential in every market as long as you know how to buy and what strategies to use. Ultimately, consistent investing is essential for growth and protecting your money from inflation.

By investing now through Gatsby’s syndication platform, you can capitalize on low property prices, benefit from diversification, hedge against inflation, and leverage our expertise to maximize your investment potential.

Join us and take advantage of the unique opportunities today’s market presents. If you have any questions or need further information, please don’t hesitate to contact our investment team. We are here to help you navigate and succeed in your real estate investment journey.

The Psychology of Investing: 5 Mental Traps and How to Avoid Them

Is your mind keeping you from making sound investment decisions? How you think about investing can have a huge impact on your success!

In this psychology-of-investing post, we're looking at five common mental traps that investors fall into. We'll explain:

  • What each trap looks like, 
  • Why they're a problem, and 
  • How you can overcome them. 

By understanding and sidestepping these psychological pitfalls, you'll be better equipped to make smart, confident investment decisions. 

So let's dive in and find out how to keep your mind from messing with your money.

1. The Analysis Paralysis Trap

What it looks like: I don’t want to start investing until I have learned everything about every investment type so I can always optimize my portfolio.

Why it’s a problem: Time spent learning is time not spent in the market, which means missed opportunities. Worse, the longer you wait to start, the less time you have to enjoy the compounding returns that provide exponential growth.

How to overcome it: Take the leap and learn as you go, knowing that you’ll make mistakes along the way. The sooner you start, the sooner you can make your mistakes, learn your lessons, and hone your investment strategies

2. The Loss Aversion Trap

What it looks like: Sure, I’d be happy to gain $1K from investing, but I’d be devastated to lose even $500. The physiological pain of losing money is way worse than the pleasure of gaining money. 

Why it’s a problem: There is no reward without some risk. Low-risk investments, like bonds, CDs, and treasury bills) might not even pay enough to keep up with inflation, meaning your portfolio would lose purchasing power over time anyway. If you invest long enough, you will lose money at some point. But that’s okay because the years with high returns offset the losses from temporary market dips.  

How to overcome it: “Set it and forget it.” Commit to a long-term investment strategy and resist the urge to constantly monitor your portfolio’s performance. Instead, check in just once or twice per year to see if adjustments are needed. Make sure your portfolio is diversified across varied investment types. This way, if investment struggles, your portfolio will remain bolstered by the well-performing investments.  

3. The Sunk Cost Trap

What it looks like: I have so much money invested in this stock that keeps going down. As soon as the value comes back up to the break-even point, I’m selling!

Why it’s a problem: Continuing to invest in a failing venture because of money already spent can lead to further losses and missed opportunities. In the case of underperforming stocks, you would be better off financially if you sold the stock at a loss and put that money into stocks that are performing well. You can’t recoup the money already spent, but you can decide how to move forward. 

How to overcome it: Regularly evaluate investments objectively and be willing to cut losses so you can move that investment capital into a vehicle that is seeing gains.

4. The Pseudo-Certainty Trap

What it looks like: Yikes! My stock portfolio is losing money, and I need to win this money back by any means necessary. Maybe the high-risk cryptocurrency market can help my portfolio bounce back? Let’s try it!   

Why it’s a problem: This is a gambler’s mentality. When you’re losing money, you’re so desperate to earn it back that you take unnecessary risks. By all means, cut your losses and move your money into assets that are performing better. But don’t look for a quick fix in high-risk vehicles. You’re statistically more likely to dig yourself into a deeper hole that way.  

How to overcome it: Practice patience. You might not be able to recoup losses immediately, but that’s ok because you can recover them over time. Instead of panic-buying into high-risk deals, switch to a proven strategy, like investing in real estate.  

5. The Superiority Trap

What it looks like: Not to brag, but I’m smarter than the average person, and I can use my intellect to outperform the market.

Why it’s a problem: Statistically, beating the market as an individual investor is highly unlikely. This is largely because 1) you don’t know what you don’t know and 2) markets are so complex that unforeseen circumstances can pop up out of nowhere. Relying on your own knowledge and experience reduces your chances of capitalizing on opportunities.   

How to overcome it: Leverage the knowledge and experience of industry pros. Take real estate for example. Investing in a turn-key property on your own requires you to shoulder the financial burden and market risk alone. You have to know how to find and screen tenants, manage day-to-day operations, avoid legal issues, and increase rental property value over time. Any blind spot can result in losses. By comparison, if you were to invest in a real estate syndication project, you would have a whole team of experts handling every detail of your investment to maximize return potential while minimizing risk.      

The Bottom Line

We like to think that we’re all perfectly rational investors, being led by the numbers. But the psychology of investing shows that your subconsciously biased thoughts play a role too.

The good news is that an extra dose of mindfulness goes a long way toward combatting these mental traps. And with the tips listed in this post, you can train your brain to make better financial decisions.

What Makes Gatsby Investment’s Platform Unique?

Once upon a time, unique, high-value real estate deals were available only to the wealthy elite. But today, Gatsby Investment is bringing these deals to everyday investors through a unique online investment platform. 

Gatsby’s real estate syndication investment model allows investors with zero prior experience to buy into complex real estate development projects. These deals are expertly vetted and managed from start to finish by Gatsby’s team of real estate analysts and project managers. So your returns are completely passive. You receive all the benefits of a professionally managed real estate development project without investing your own time and energy or shouldering the upfront financial costs alone.   

But what makes Gatsby Investment’s platform unique? Why should you trust Gatsby with your investment capital? 

Here are five ways Gatsby Investment stands out from other real estate crowdfunding platforms.  

Localized Expertise

Based in Beverly Hills, Gatsby focuses heavily on the Los Angeles housing market. There are several compelling reasons to invest in LA real estate, including:

  • Consistently high demand. With 63% of Angelinos renting rather than owning, there is a wide investor-buyer pool. And, despite the high cost of living, LA’s impressive amenities continue to draw residents from all over the world.

  • High rental rates. As of June 2024, the average rent in Los Angeles is $2,111 per month, 39% higher than the national average. Renters are willing to spend serious cash to live in Los Angeles. A recent analysis found that LA rents increase nearly 2% more than the national average each year. 

  • Favorable housing regulations. To combat the chronic SoCal housing shortage, California has enacted legislation that makes it easier to develop new housing units. And Gatsby is capitalizing on these opportunities. Take the recent zoning changes, for example. Developers can now build 4-10 units on many lots zoned for single-family. By purchasing affordable single-family lots and building multi-family developments from the ground up, we can create much more valuable properties. Or consider the ADU (accessory dwelling unit) legislation, which streamlines the permitting process to allow property owners to build a separate living space on their single-family lots. By adding ADUs to our home flip projects, we can quickly increase return potential. 

By focusing locally, we have been able to stay on top of changing trends and adapt our strategies to create higher return potential for our investors.  

A Strong Niche

We have used our local expertise to develop a strong strategic niche in the SoCal market. 

We focus on new construction multi-family developments of 4-6 units. 

Building from the ground up allows us to take full advantage of California’s zoning law changes. We can purchase a low-cost single-family lot in an in-demand area, and construct multiple units on the lot, making the most of the land investment. 

We focus on smaller developments because they are in greater demand. They are accessible to more investors than larger apartment buildings, so we have a wider pool of potential buyers. Not only are these developments less expensive than buildings with dozens of units, but they are also eligible for more financing options. The high demand for these smaller multi-family buildings increases the likelihood of a quick, highly profitable sale upon completion of the project.   

Each unit in our developments is designed for today’s renters. We’re seeing increasing demand for larger units, both from families who have been priced out of the housing market and from young adults who live with multiple roommates to keep housing costs lower. Each unit offers 3-5 bedrooms. The bedrooms within the units are sized similarly to one another, making it ideal for roommates who are splitting the rent evenly. And each bedroom comes with its own bathroom, which is important for both families and roommates.

Focusing on this niche has provided repeated success, and we increase our efficiency with each new project of this type. 

Proprietary Software

Gatsby Investment’s online platform was designed to streamline the investing process and manage projects effectively and efficiently. 

From our convenient, user-friendly dashboard, you can:

  • Sign up to be notified of new investment opportunities as they arise, 
  • Review the details of each project, including the property address, estimated costs, and projected returns
  • Apply to be verified as an accredited investor through our third-party verification service, Verify Investor,
  • Choose your project(s) and place your investment,
  • Sign the applicable paperwork to become an official member of the LLC that owns the property,
  • Track the progress of your project(s),
  • Receive applicable tax forms, and 
  • Review the project’s final financials so you know how much to expect when we disburse funds upon completion of the project. 

Long-Standing Industry Relationships

Operating locally over the last several years has enabled Gatsby to build relationships with industry professionals who can help increase returns for investors. 

We work with real estate agents and brokers to find off-market properties that can be purchased below market value. And because of our relationships with local lenders, we are able to negotiate favorable terms on financing, like lower interest rates. This reduces our interest expense, which increases our bottom line on the project. 

We also have well-established relationships with local architects, designers, and builders. Our repeat business gives us bulk pricing on materials, reduced rates on labor, and ensures consistently high quality in our builds.  

A Track Record of High Returns

Even more important than Gatsby’s unique systems are its results

Our track record speaks for itself. From 2017 through 2023, Gatsby provided average annualized returns of 23% to our investors! And we have a 100% success rate, having never lost money on a deal. 

Our localized expertise, strong niche, proprietary software, and long-standing industry relationships all contribute to our above-average returns. And, while market conditions are always changing, the Gatsby platform is always ready to meet these changes head-on.

Invest with Gatsby Today!

Are you ready to invest in real estate with the unique advantages of Gatsby Investment’s platform? Join the 15,000 investors who trust Gatsby to provide outstanding results. Explore investment opportunities and place your investment today!

Rental Management Secrets from a Luxury Property Manager

Managing rentals is a classic method of making money in residential real estate. In fact, properly building and managing a rental portfolio is one of the best ways to become a millionaire through real estate

Even if you’re new to real estate investing, you might already know the basics of rental property management: lease apartments, collect rent, address maintenance issues, renew leases, repeat. But to be a successful rental owner in a competitive market, you need to know much more than the basics. 

So today, we’re sharing rental management secrets from a luxury property manager (that’s me!).  

Hi, I’m Michelle, Your Luxury Property Manager

Long before I started writing articles on real estate investment and finance, I was a luxury property manager and real estate investor. I professionally managed hundreds of luxury units throughout Los Angeles and San Diego for years before building and managing my own small portfolio of luxury single-family homes.

And let me tell you, I’ve learned a thing or two about what it takes to successfully manage rental properties, especially in the luxury market!

Whether you’re a single-family rental property investor, looking for tips to elevate your rental management, or a multi-family developer, looking to lease up your new construction properties, you’ll find some advanced tips in this article!   

Disclaimer: property management rules and regulations vary from one market to the next. Make sure you understand your local laws.

With that said, let’s dive into my rental management secrets with a look at the development process.

Secrets for Designing and Building Successful Developments

Developing spaces that appeal to today’s rental market is step one in finding rental management success. Get in on these industry secrets before they go mainstream.

Layouts that Serve as “Family Living” or “Shared-Living” Spaces are in High Demand

Renter needs have changed as the cost of housing has increased substantially in recent years. While one and two-bedroom units have been popular for decades, demand is shifting to larger units with more bedrooms. 

These larger units are serving two specific demographic groups:

  1. Growing families who have been priced out of the housing market. This group is driving the increase in build-to-rent homes, which are characterized by larger units that feel like a home and can comfortably accommodate at least one or two children.
  2. Young adults practicing shared living (aka co-living) with multiple roommates. To make rent more affordable, many renters are looking to split the rent between multiple roommates. But they need a comfortable layout to make this arrangement work well. Three to five bedrooms, all similarly sized, and all with a private bathroom make for an ideal shared living layout.      

Proptech Upgrades are a Competitive Advantage

Today’s renters are tech natives who grew up in the age of technology and are far more comfortable with it than without it. 

Residential proptech can be a good investment if it serves your demographic, particularly when it helps protect your property. Consider adding smart home features like locks, lights, doorbells, and temperature control to make your units safer, more comfortable, and more energy efficient.

Low-Maintenance Luxury Amenities Will Save Money and Your Sanity

Many developers and investors mistakenly believe they need to offer common area amenities like pools, spas, and fully equipped fitness centers to attract renters. In reality, these amenities require constant maintenance and repairs. Not only does this cost you money, but every time an “out of order” sign is placed somewhere on your property, it invites criticism. 

Instead, focus on low-maintenance amenities that feel luxurious, like rooftop decks, for example. Or a “wellness” center with yoga balls, pilates mats, and free weights rather than complicated cardio equipment and weight machines. 

Also, don’t underestimate the value of convenience amenities, like parking spaces, on-site storage units, and facilities for accepting package deliveries.   

Secrets for Successfully Leasing Units

As Operations Manager for a 298-unit new construction project in Marina del Rey, I worked with a stellar team of leasing specialists to take the property from vacant to fully occupied. 

Here are some of the secrets of our success.   

Pre-Leasing Builds Buzz

Most cities allow property owners to begin leasing units before the units are ready for occupancy. Pre-leasing allows you to speed up your cash flows to help you recover your investment sooner. Just as importantly, pre-leases work as a marketing tool. You can promote the fact that multiple units have already been claimed to create a sense of urgency for other prospective renters.

Staging (Whether Physical or Virtual) Helps Prospects See the Potential

Renting empty units can be difficult because there’s nothing to help the renters feel at home in the space. Luckily, there are a few ways to use staging to address this problem.

If you have a large apartment building, consider setting aside a unit (or two) to serve as a model. This unit will be professionally staged to show prospects what their unit could feel like. You’ll take all prospects through this unit on the community tour, possibly showing them a vacant unit as well once they see what can be done with the space. Yes, you’ll have vacancy losses for this unit, but the increased conversion rate of prospects to tenants can offset this loss.

If a model unit doesn’t make sense for your property, you have two staging tools to employ:

  1. Virtual staging. Have a photo editor enhance your listing photos with digital furnishings and art to make the space come to life. 
  2. Vacant staging. Add a few strategic pieces to warm up a vacant unit. For example, coffee service on this kitchen counter and fresh towels in the bathrooms instantly give these key rooms a homey touch. You can also make bedrooms feel brighter by adding a plant with uplights in one corner.   
If you have vacant units to lease, you might want to combine virtual staging with vacant staging, so the unit shows well in the marketing materials and in person. 

Managers Add Life to Big Empty New-Construction Buildings

Big empty buildings give off a creepy vibe, no matter how well designed. So if you have a new-construction multi-family development to lease up, you need to find ways to inject life into the property for your tours. Here’s how:

  • Stage a few balconies and patios. Set up bistro sets, outdoor chaises, and plants on some of the vacant unit’s outdoor spaces.
  • Bring in some noise. To prevent the eerie quiet, pipe some music into common areas and/or birdsong into outdoor courtyards.  
  • Invite people to hang out at the property. To really bring your building to life, invite your friends to hang out at the property during peak leasing hours. They can enjoy the amenities, read a book on a balcony, or enjoy a cup of tea and a chat with their friends on a patio.   

Strategic Concessions Incentivize Prospects

If you have lots of units to lease, a concession can help you bring occupancy up quickly. Concessions are often better than rent reductions from a property management point of view. If you offer lower rental rates, it will be harder to convince residents to pay the higher market rates at renewal time. But, if you offer two weeks free, or even one month free, residents will be accustomed to paying market rate rents through the rest of their lease term, so they won’t have such a shock if rates increase at renewal time. 

Secrets for Resident Retention

It’s not enough to fill your units with renters; you also have to keep them. Reducing resident turnover lowers turn costs and vacancy losses between tenants. 

Building a Community within the Development Leads to Less Turnover

If your residents become friends, they will be more inclined to stay in the building longer. They won’t want to risk giving up their social group by moving out. So you might want to invest in events that bring everyone together. And there are lots of options, depending on your demographics:

  • Wine tasting in the clubhouse or courtyard
  • Community game nights
  • Ice cream socials
  • Movie screenings 
  • Family cookout at the community grill

The goal is to introduce people and let them get to know each other. The more opportunities they have to meet, the more likely they are to establish relationships outside the community events. 

Surprising and Delighting Residents Build Loyalty

There are many ways to make your renters feel valued without spending too much money. I love to delight residents with small surprises throughout the year, such as:

  • A “Welcome Home” gift basket on move-in day, 
  • Coffee gift cards on International Coffee Day (October 1st),
  • Poinsettias during the holidays,
  • Easter or May Day baskets with candy, and
  • Beach towels during the summer.

Offering Flexible Lease Renewals Increases Retention

Instead of only offering one-year lease renewals, give your residents more options so they can choose a term that works for them. You might offer six-month, three-month, or even month-to-month lease terms in addition to the one-year option. 

Of course, the longer they stay, the more stable your cash flows. So you should incentivize them to take the longer lease options by making those more affordable. Depending on your local market conditions, you might offer a one-year lease at 5% below market value, a 6-month lease at market, a 3-month lease at 5% above market, and a month-to-month lease at 10% above market.   

You Can Always Opt to Leave the Rental Management to the Experts

If you don’t have the time or desire to master rental property management yourself, you can always leave the management to professionals. 

One option is to hire a property management company to manage the properties you own. A good property manager will know which strategies work best for your properties. 

If you want all the benefits of investing in real estate, but you’re overwhelmed by the process of finding, acquiring, renovating, and managing properties, consider investing in real estate syndication.  

Real estate syndication is an investment model in which multiple investors pool their capital to fund a real estate project. The project is managed from start to finish by industry experts (called real estate sponsors). 

The syndication sponsor:

  • Vets potential deals, 
  • Acquires properties with the greatest potential,
  • Opens an ownership LLC for the investors so they have a clear stake in the underlying real estate,
  • Oversees the renovation, using existing connections to hire reliable development professionals,
  • Manages the lease-up (if the property is held as a rental) as well as ongoing rental operations, 
  • Coordinates the sale of the property upon completion of the project, and
  • Facilitates disbursements to investors.

This allows you to build a real estate portfolio with zero industry knowledge or experience. The constant involvement of an experienced sponsor also helps minimize investor risk and maximize return potential. Gatsby Investment, for example, has provided investors with average annualized returns of 23% since 2017! And, because funds are pooled from multiple investors, you can buy into a deal for as little as $10k-$20k. 

Out With Private Equity and In With Syndication

Private equity investments are declining while real estate syndication investments are increasing. This could have major implications for real estate investors, so we want to explore why private equity is on its way out while syndication is coming in. 

Private Equity vs. Real Estate Syndication

Real estate syndication and private equity
are similar investment models, in that they both accept funds from multiple investors to fund a real estate project (like a long-term rental holding or a new construction development). 

But, while private equity deals are contained to a small group of wealthy elites, syndication offers these deals to the general public, making investments more accessible to everyday investors. Syndication is often used synonymously with the term “real estate crowdfunding,” which many investors are more familiar with.     

Over the last few years, private equity has struggled compared to crowdfunding/syndication. In 2023, the aggregate exit value of private equity investments was down 23.5% compared to 2022 (and down 72% from 2021). Real estate crowdfunding/syndication, on the other hand, is projected to grow by an average rate of 36% per year through 2027.  

Why Private Equity is Losing Ground

So why is private equity declining while syndication is growing? Here are a few reasons:

  • Lack of transparency. Private equity deals are often agreed to with a handshake behind closed doors. By definition, private equity deals are not public, so the Securities and Exchange Commission (SEC) does not hold them to the same reporting requirements as public investments. Additionally, private equity deals are often offered as whole fund, rather than deal-by-deal. This means that investors buy into a portfolio of properties rather than choosing the specific assets they want to be part of. Many investors are moving away from this type of shadowy deal into investment structures with greater financial transparency. 

  • Smaller investor pool. Because private equity deals cannot be marketed to the public, they rely on existing relationships between investors and their investment brokers. With so few investors to contribute funding, each investor must cover a higher share of the upfront financial cost.

Why Real Estate Syndication is Gaining Ground

Now, how is real estate syndication growing when faced with the same housing market conditions as private equity? Here are a few key reasons:

  • Accessible investment platforms. User-friendly platforms make it easy for investors to find and compare investment opportunities. 

  • Lower minimum investment amounts. With a deeper pool of investors available, syndication projects can bring more people into a deal, which reduces the minimum investment amount for participants. 

  • Innovative investment models. Syndication firms are highly adaptive and able to respond appropriately to changing market conditions. For example, in response to skyrocketing housing costs, smart syndication firms have shifted to in-demand affordable housing solutions, including Section 8 housing, build-to-rent homes, and multi-family developments with a focus on shared living layouts for those with multiple roommates.   

  • High level of transparency. Real estate syndication offers deal-by-deal investing, which allows you to choose the specific project(s) you wish to invest in. Projected financials are shared with investors before they contribute funds to the project. 

  • Beginning-to-end service. The syndication sponsor takes care of every aspect of the deal for you, from vetting potential properties to overseeing construction and selling the completed property. This beginning-to-end service results in completely passive returns for investors.   

How to Invest in Syndication

Investing in syndication is easy:

  1. Sign up with a real estate syndication company.
  2. Get verified as an accredited investor.
  3. Choose your investment project(s).
  4. Wire your funds.
  5. Track the progress of your investment(s)!

Whether you’re looking to move away from the private equity sector, or you’re simply looking for an affordable way to invest in professionally managed deals, real estate syndication may be a good fit for you!

Work Doesn’t Build Wealth

I’m a big fan of hard work. A strong work ethic is the backbone of the American economy. Without it, the whole system falls apart. But work doesn’t build wealth. 

Very few people will ever get wealthy from their income. For starters, there are only so many hours in the day. So your income potential is limited by how many hours you can commit to work and how much you can accomplish in those hours. 

Secondly, most jobs just don’t pay enough to create wealth. Even an attorney making $100 an hour with a standard workweek only earns $208,000 per year. It’s a lot, sure. But once the taxes are taken, bills are paid (including those expensive student loan payments), and reasonable needs are met, there’s not a ton left.

So what does it take to build wealth?

The secret to building wealth and achieving financial freedom is to make your money do the work.     

How to Make Your Money Work

When you put your money to work, it can work round the clock, generating wealth while you’re sleeping, handling projects around the house, or working your day job. 

The way you make your money work is by using it to buy or create assets that will appreciate over time and/or generate passive income

Here are a few examples of making your money work for you:

  • Use your income to purchase or build a business. Many business models are fairly passive. For example, automatic car washes, laundromats, and vending machines can bring in fairly good money without requiring much time. If you’re interested in a business model that requires more active management, you can hire a manager to oversee operations so that you don’t have to invest too much of your own time in the venture.

  • Invest your income in rental properties. Rental properties come with several financial benefits, including passive rental income, long-term appreciation, and tax breaks. Turn-key properties typically require very little active management once the renters have moved in, but the upfront financial investment is substantial.

  • Invest your income in a real estate syndication project. If you want the benefits of investing in real estate, but you don’t have the funds to purchase a property on your own, syndication may be a good fit for you. Similar to crowdfunding, syndication pools funds from multiple investors to finance a single, professionally managed project. It could be a quick fix-and-flip, a multi-family development, or a long-term rental. And, because the deal is professionally managed, there is no industry experience or knowledge needed.

What Happens When Your Money Works for You?

Let’s crunch some numbers to compare building wealth with income vs. building wealth with investments. 

Let’s assume you make $100,000 per year. And you budget your money so you can save $12,000 per year. 

If you consistently save $12,000 of your income every year for 10 years, you’ll have $120,000 at the end of year 10. Keep this up for 20 years, and you will have $250,000. That’s not bad. But it’s also not wealth.

Now, what if you take the $12,000 saved at the end of Year 1 and invest it in real estate syndication projects earning 15% per year? (By the way, 15% per year is realistic, given that the average annualized return for syndication from Gatsby Investment is currently 23%.)

At the end of Year 2, you would have your original $12,000 plus the 15% return ($1,800) plus the $12,000 accumulated over Year 2. That gives you a total of $25,800.

At the end of Year 3, you would have your total from Year 2 ($25,800) plus 15% on that ($3,870) plus the $12,000 accumulated over Year 3. That gives you $41,670.

The pattern repeats each year, and by the end of Year 10, you have $243,645! Now, keep this up for 20 years, and you end up with $1,229,323!   

This magic wealth-building strategy takes advantage of compounding interest. It allows you to grow your wealth exponentially by reinvesting your investment earnings until you have a large enough portfolio that you can literally live off the returns. That’s wealth. 

Start Building Wealth Today

Your income will never make you wealthy. But when you put your money to work, you can build wealth that can bring you financial independence and even provide for future generations

The longer you wait, the less time your dollars have to work their magic, so put them to work today. Start building your business, buying your rental properties, or choosing your real estate syndication projects now.

What the NAR Settlement Means for Real Estate Investors

Real estate agent fee structures may be changing. And that could have a big impact on real estate investors…or not. 

Last month, the NAR (National Association of REALTORS) proposed a settlement to resolve litigation brought by home sellers regarding real estate agent commissions. Home sellers accused NAR members of colluding to keep real estate agent commissions high and to force sellers to pay the fees for the buyer’s agent as well as their own agent.  

In reality, agent commissions have always been negotiable between the seller and the seller’s agent (aka, the listing agent). There was never a “6% rule” stating that the seller had to pay 6% of the sales price in real estate fees. It just happened that most local markets settled at the 5-6% range, which is the amount sellers were willing to pay, and agents willing to accept. The seller’s agent would then split this fee with the buyer’s agent. This is because most buyers don’t have liquid funds to pay their own agent after paying the down payment, closing costs, and moving expenses. But we, as a society, felt buyers deserved professional representation. That’s why this commission structure has been in place for so long. 

So it was surprising when the NAR proposed a $418 million settlement and agreed to make some changes in how agent commissions are handled.

Let’s look at those changes and what they could mean for real estate investors.  

What Are the New Rules Under the Settlement?

The settlement hinges on two new commission rules:

  1. Listing agents can no longer publish a buyer’s agent fee on the MLS (Multiple Listing Service). The MLS is the database of homes listed for sale. Traditionally, the listing agent would publish the commission a buyer’s agent could expect to receive once the deal closed. This information is no longer allowed. However, there is no rule saying that listing agents can’t offer a buyer’s agent commission. The information simply can’t be listed on the MLS.
  2. Buyers must have a signed agreement with a buyer’s agent before seeing any property. Traditionally, buyers could have an agent show them properties without committing exclusively to that agent (although experienced buyer’s agents typically requested a commitment early in the home search process to protect themselves). The settlement requires buyers and agents to have an agreement in place upfront, and this agreement must address the agent’s compensation.

What the Proposed Rule Changes Mean for Investors

It’s difficult to say at this point how the market will respond to these changes, but here are the likely scenarios:

Scenario #1: Business as Usual

There is nothing in the settlement rules preventing sellers from helping cover the cost of the buyer’s agent. And, with so many buyers struggling to purchase homes due to high upfront costs, motivated sellers are likely to offer concessions to buyers to help them pay for their agent so they can complete the purchase. This would incentivize other sellers to do the same to remain competitive. 

Instead of paying 5-6% to their agent, who would split the commission with the buyer’s agent, the seller might pay 2.5-3% to their agent plus another 2.5-3% to the buyers so they can pay their agent. 

For real estate investors, this would mean that some of the language in the purchase agreement would change, but this would make no tangible difference to the transaction. 

Scenario #2: Real Estate Commissions are Dramatically Disrupted

Some of the home sellers who brought suits against NAR are aiming to force buyers to pay for their own real estate agent fees. In fact, as of mid-April, there is some concern that the Department of Justice (DOJ) will step in to amend the settlement and require buyers to pay their own agents.

This would be a major disruption to the real estate industry, which could lead to any or all of the following:

  • Real estate agents could accept lower commissions. Real estate is a more difficult profession than outsiders realize. Most industry insiders believe a 5-6% total commission is fair because the amount is split between buyer and seller agents, each of whom must pay a large cut of that (often 25-50%) to their supervising brokers. And, since agents are not employees, they cover their own self-employment taxes, retirement, and healthcare expenses from their earnings. Many agents are not in a position to work for less. However, we could potentially see more tiered packages from buyer’s agents.  

  • More buyers would be forced out of the market. Vulnerable first-time buyers would have another substantial hurdle to homeownership. Military service members, veterans, and their surviving spouses would be unable to use VA funding to purchase a home because the VA prohibits VA buyers from paying any real estate fees.

  • Property values could drop. The attorneys in the suits against the NAR argued that home prices would fall if sellers didn’t have to pay such high real estate commissions. One could argue that it’s more likely the sellers would pocket the extra money saved on real estate fees rather than voluntarily reduce the home price. However, with more buyers forced out of the market, it would be possible to see falling home values. 

For small-scale real estate investors, this type of disruption would make it harder to buy an investment property. On top of the down payment, closing costs, and renovation expenses, you would have to pay out-of-pocket for your real estate agent. 

For larger-scale investors, this would increase your acquisition costs if you have to pay your own buyer’s agent, but it is possible that home prices could come down if there is less buyer competition. 

All real estate investors could be hurt by falling home prices, which would reduce the value of their real estate portfolios. A declining market could be a good opportunity to buy new properties, but the savings could be offset by the buyer’s agent fees. And all investors could save money on the back end if they don’t have to pay for the buyer’s agent when they sell a property. 

The Bottom Line

With the uncertainty about how real estate agent fees may change in the next few years, now is a good time to diversify your real estate portfolio. You might consider buying a property before the NAR settlement rules go into effect (estimated for July 2024). Or you might choose an alternative real estate investment like real estate syndication to give yourself some protection against changing markets.

Follow Gatsby Investment for meaningful insights into evolving real estate conditions! 

10 Actionable Ways to Improve Your Finances Today!

Are you feeling powerless to improve your financial life in the face of uncontrollable circumstances like macroeconomic trends, illness, and missed opportunities? 

While some things are outside of your control, you are in control of the most important driving factors in your life. You get to choose your responses to your circumstances and your behaviors going forward. This can be the difference between poverty and prosperity decades from now.   

By focusing on what you can control, you can enhance your overall well-being and navigate life's uncertainties more effectively.

With that in mind, here are 10 actionable ways to take control of your financial life today:

1. Set clear financial goals 

Define your goals based on your values and the lifestyle you want to build for yourself.

2. Create a budget 

Establish a budget that tracks your income, expenses, and savings. Categorize spending to identify areas where you can cut back without much sacrifice.

3. Improve your credit score

You can boost your score simply by paying your bills on time and using less than 30% of your available credit. 

4. Reduce high-interest debt 

Prioritize paying off high-interest debts, such as credit cards, to save on interest expenses.

5. Carry appropriate insurance 

Insurance is a risk management tool that can protect you against financial losses. This is especially valuable when it comes to factors you can’t control.

6. Start saving and investing

Build an emergency fund to cover 3-6 months of living expenses. Then you can shift your focus to investing for financial growth.

7. Live below your means

Don’t spend more than you earn. Focus on covering your essential needs first, such as housing, utilities, groceries, and transportation. Then add in the wants that matter most to you.  

8. Create multiple income streams

Explore side hustles or passive income investments to increase and diversify your income.

9. Educate yourself

Learn more about personal finance and investing. This will help you make informed decisions that serve your goals.

10. Practice patience and discipline

Building financial freedom takes time. Stay disciplined in adhering to your financial plan, even during market fluctuations.

When you’re ready to learn more about investing for financial freedom, the real estate syndication experts at Gatsby Investment can help. Visit our education center for helpful resources.

5 Key Differences Between Real Estate Syndication and Crowdfunding

Syndication and crowdfunding are two similar ways of investing in real estate. High net worth individuals have been using these models to fund real estate projects with friends and family for a very long time. But the JOBS Act of 2012 made it possible for investment companies to promote their offerings to the general public, which ultimately opened the door for everyday investors to invest in real estate, with no prior experience requirements and less money down.

Real estate syndication and real estate crowdfunding are both methods of pooling capital from multiple investors to invest in real estate projects. But they have some key differences to be aware of. So before you start looking for your next investment, let’s do a syndication vs. crowdfunding comparison to find out which model is right for you. 

1.   Structure:

Real Estate Syndication: In a real estate syndication, a group of investors forms a partnership or joint venture which is typically led by a sponsor or syndicator. Each investor becomes a direct owner in the property and has a share of the responsibilities and potential returns. This is often a more traditional structure where investors have a more active role in decision-making. However, some of the larger syndication companies may offer an ownership in the deal and a complete passive experience, in which the sponsor/syndicate makes all decisions on behalf of its investors. 

Real Estate Crowdfunding: Crowdfunding often involves a larger number of investors, contributing smaller amounts of money through an online platform. Investors usually invest in a specific project or portfolio without direct ownership. The platform acts as an intermediary, and investors typically have a more passive role, relying on the sponsor or platform to manage the investment.

2.   Investor Involvement:

Real Estate Syndication: Investors in a syndication typically have more direct involvement in the decision-making process. They may have voting rights on major decisions, and their level of influence depends on their ownership stake. 
Real Estate Crowdfunding: Crowdfunding investors are generally more passive. They invest in a project but often have limited influence on the day-to-day decisions. The platform or sponsor manages the property, and investors receive returns based on the terms set forth in the investment.

3.   Minimum Investment:

Real Estate Syndication: Syndications often require larger minimum investments. The barrier to entry can be higher, making it more suitable for investors with some larger capital available. Most syndication companies are only able to offer its investment opportunities to Accredited Investors

Real Estate Crowdfunding: Crowdfunding platforms typically have lower minimum investment requirements, allowing a more diverse group of investors to participate. Those platforms and offerings are often times open to non-accredited investors.

4. Deal Sourcing:

Real Estate Syndication: Syndicators often source deals through their network, relationships, and industry expertise. The syndicator may also contribute their own capital to the project.
Real Estate Crowdfunding: Crowdfunding platforms act as intermediaries that source and vet deals. Investors select from the projects listed on the platform, and the platform handles the administrative aspects of the investment.

5. Risk and Return:

Real Estate Syndication: Investors in a syndication generally take on a more active role and, therefore, may have the potential for higher returns. However, they also bear a proportionate share of the risks and responsibilities.

Real Estate Crowdfunding: Crowdfunding investors typically have a more hands-off approach, which may result in more moderate returns. However, they also have less direct exposure to the day-to-day management of the property.

Which Type is Right for You? 

Both real estate syndication and crowdfunding have their advantages and are suitable for different types of investors based on their preferences, accredited status, and investment goals.

How to Start Investing in Real Estate Syndication

To get started, do your research of finding a crowdfunding/syndication service that is right for you.

Gatsby Investment, is a Los Angeles-based real estate syndication company, with a history of providing exceptional returns to investors. With a strong niche of focusing on value-add and ground-up construction projects, Gatsby has generated an average annualized return of 23% to its investors between 2017-2023. 

Sign up with Gatsby today and choose your real estate investment project(s) to be part of the real estate crowdfunding and syndication revolution.

The Big Advantage of Capital Gains Taxes for Investors

As an investor, you are taxed on your profits (which are commonly called realized gains or simply, gains). The good news is that your gains might be taxed at a lower tax rate than you’re used to. This is thanks to capital gains taxes. Capital gains tax rates are one of the many tax benefits of real estate investing, but this benefit can apply to other investment types as well. 

Let’s take a look at capital gains taxes: what they are, how they work, and why they are such a big advantage for investors.  

What are Capital Gains Taxes?

Capital gains taxes are a special category of income taxes specifically levied on the profit made from selling an investment.

It’s important to understand that you are not taxed on the full sales price of your asset; only on the profit. So, for example, if you purchased stocks five years ago for $10,000 and sold them today for $15,000, you would only be taxed on the $5,000 gain.  

Capital Gains Tax vs. Earned Income Tax

Earned income taxes are taxes levied on your normal income (like salaries, hourly wages, or commissions you receive from your job). 

If you hold an asset for under a year, the profits are taxed at the short-term capital gains rate, which is equal to the earned income tax rate. 

However, if you hold an asset for one year or longer, it is considered a long-term investment for income tax purposes, so it is taxed at the long-term capital gains rate. This rate is significantly lower than the earned income rate in the US.   

While income tax brackets can reach as high as 37% (as of 2024) for earned income, the maximum tax rate on long-term capital gains is just 20% (although there is a special 28% capital gains tax on the sale of collectibles).

This differential can result in substantial tax savings for investors.

How are Capital Gains Taxes Calculated?

Calculating capital gains tax depends on how long you hold the asset before selling and which tax bracket you fall into.

Short-Term Capital Gains

As mentioned, short-term capital gains apply to assets held for less than a year. These are taxed as ordinary income. 

So, for example, let’s say you earn $12,000 in profit from the sales of a short-term house flip. If you fall into the 24% income tax bracket, your tax on this gain would be $2,880 ($12,000 x 24%).

Long-Term Capital Gains

Long-term gains, for assets held for over a year, benefit from lower capital gains tax rates. 

For the 2024 tax year, long-term capital gains are taxed using the following schedule:

  • 0% for profits up to $3,150.
  • 15% for amounts between $3,151 and $15,449.
  • 20% for amounts over $15,450.

Let’s say you invest $30,000 in a syndicated multi-family build-to-rent project, which takes 24 months to build and is held as a rental for 12 months before being sold. If you earn a 15% annualized return your capital gains on this deal would be $13,500. You would pay 0% on the first $3,150, then 15% of the remaining $10,350, giving you a capital gains tax total of $1,552.50. 

That’s a savings of $1,327.50 compared to earned income taxes on the same amount (if you’re in the 24% income tax bracket)!  

It is important to note that, while long-term investments benefit from lower capital gains rates, short-term investments often come with higher yields. So don’t ignore strong short-term investments just because of the tax rate.   

Which Investments are Taxed as Capital Gains?

Generally speaking, profits from the sale of any appreciating asset can be treated as capital gains. This includes investment types like:

  • Stocks and bonds.
  • Real estate investments (your primary residence is granted an even higher capital gains exemption than investment properties).
  • Mutual Funds, ETFs, and index funds.

Profits from the sale of collectibles are also charged as capital gains, however, these fall into a special 28% capital gains rate.

The Bottom Line

The US government awards investors with lower tax rates on the sale of investments held for a year or longer. Whether you’re selling stocks, bonds, funds, or real estate, you could potentially benefit from this big advantage of capital gains taxes for investors!

Disclaimer: This post is for informational purposes and is not to be considered legal advice. It is always advisable to seek advice from a licensed tax professional before making investment decisions. 

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Gatsby Investment’s Performance

Since the start of the company in 2016, Gatsby has acquired over 78 deals. As of July 1, 2024, 53 of those offerings have been completed. This makes Gatsby Investment the leading real estate syndication company in Los Angeles. View completed deals.
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Average annualized net return from 2017–2023
Acquired Deals