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.

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.

What the Rise in Multi-Generational Tenancy Means for Real Estate Investors

A 2022 study conducted by the Pew Research Center found that around 18% of the American population live in multi-generational households.

The study defined multi-generational households as those with at least two generations of adults over 25. For example, parents may have adult children over 25 who still live at home. Or adult children may have elderly parents living with them. Pew’s definition of multi-generational households also includes those with a “skipped generation,” meaning that grandchildren live with their grandparents.

According to this data, the percentage of multi-generational households has been steadily climbing since the 1970s.

This raises important questions about how housing needs to change to accommodate multi-generational households. And not just in terms of housing inventory for homebuyers. We’re starting to see a growing need for multi-generational rentals as well.

Let’s take a look at the rise in multi-generational tenancy and what it means for real estate investors.

Why Multi-Generational Households are on the Rise

First, it’s helpful to understand why more families are choosing the multi-generational lifestyle.

Data from the Pew study shows that there is a cultural element to multi-generational living. For example, respondents who identified as either black or Hispanic were twice as likely to live in a multi-generational household as respondents who identified as white. Similarly, foreign-born residents were 52% more likely to live in a multi-generational household than native-born residents. This discrepancy may be because of the value some cultures place on staying with family. But it can also be a financial necessity.

The cost of housing has skyrocketed in recent years, especially compared to more modest increases in income. And many families view multi-generational households as a smart, cost-saving measure. In fact, the Pew study confirms that residents of multi-generational households are less likely to be in poverty than those in other living situations.

How We Arrived at Multi-Generational Tenancy

In decades past, multi-generational households were typically resident-owned. The homeowner may have allowed adult children to remain in the home or invited elderly parents to move in. But today, we’re seeing more demand for multi-generational rental housing, particularly in expensive cities with a high percentage of renters.

Take Los Angeles, for example. We recently found that rents in Los Angeles increase nearly 2% more than the national average each year. And we know that 63% of Angelenos rent rather than own. In a multi-generational household study conducted by the US Census Bureau, researchers found that 8.3% of households in Los Angeles were multi-generational as of 2020, compared to a nationwide average of 3.8% of households. (If you’re wondering why the Census’ estimates are so much lower than the Pew study, it’s because the Census Bureau defines a multi-generational household as having three or more generations living under one roof.)

There is a clear correlation between cost of living, income rates, and multi-generational tenancy. So investors in areas with high rental rates may want to meet the growing demand for rental units that can comfortably accommodate multi-generational families.

How Investors are Meeting the Growing Multi-Generational Tenancy Demand

Investors and developers have already started accommodating multi-generational tenants in several ways, including:

Adding accessory dwelling units (ADUs) to homes. ADUs, also known as guest houses, in-law suites, and casitas, are simply additional living quarters on a property. California ADU regulations effectively allow property owners to convert a single-family home into multiple living spaces, which is ideal for multi-generational households.

Multi-generational build-to-rent homes (BTRs). As more would-be buyers have been priced out of the housing market, there has been an increase in houses that are designed and built as long-term rentals. These units feel more like homes and less like apartments, giving residents the lifestyle of a homeowner without the upfront financial requirements. With more bedrooms and bathrooms than traditional apartments, BTRs can be more comfortable for multi-generational families.

Investing in real estate syndication projects that serve multi-generational tenants. You may not have the funds, resources, or knowledge to build your own ADU or BTR, but you can still capitalize on this growing trend while providing better housing options for multi-generational families. Real estate syndication pools funds from multiple investors to fund a project (like an ADU build or a BTR development). The project is professionally managed, so you get to leverage the experience of real estate experts and earn completely passive returns.

Get in on the ground floor of this emerging multi-generational tenancy trend. Start planning your ADU, developing your BTR, or investing in real estate syndication today!

Gatsby’s Formula for Short-Term Real Estate Investment Success

We have found that today’s real estate investors are looking for more flexibility in their investment portfolios. They want short-term investment options that allow for greater liquidity and strong returns. While traditional real estate investments force investors to choose between either short timeframes or solid yields, Gatsby Investment has found a way to offer both!

This article explores the unique model to uncover how Gatsby is able to achieve such strong returns on short-term investments.

Why Short-Term Investments are in Demand

With high interest rates and economic uncertainty creating a sense of unease in the marketplace, many investors are hesitant to lock up their funds in long-term investments. They want the flexibility of short-term investments, which allows them to access their cash more quickly.

The problem is that traditional short-term investments offer lower-than-average returns. Treasury notes, municipal bonds, and real estate investment trusts (REITs) are all relatively liquid, but they barely provide better yields than a savings account. And during periods of high inflation, these investments can actually cost you money if the rate of inflation outpaces the interest earned.

The solution is high-yield, short-term real estate investments. And Gatsby has created a system to make this type of investment available to investors.

Gatsby’s Specialized Knowledge and Market Niche

Gatsby has chosen the dynamic Los Angeles real estate market and have a specialized knowledge in specific LA areas. We have a strong market niche of focusing on high-demand property types and ground-up construction projects with high return potential.

By focusing on smaller builds that can be completed quickly and appeal to a larger pool of buyers, we are able to complete them in a short timeframe.

Our experienced industry professionals and proprietary software streamlines each project from start to finish, increasing efficiency and maximizing return potential.

Instead of having to rely on market appreciation over time, Gatsby’s team can force appreciation in a short amount of time by building brand-new multi-family properties from the ground up.

How Gatsby’s Unique Investment Offering Cater to Investors

Gatsby allow a wide range of real estate investors to take advantage of this high-performing strategy, by making it available on the Gatsby platform.

With the Multi-Family Development projects, investors get in on the ground floor of the investment. Gatsby then handle each step from purchasing, architectural design, city permits, construction, to the property sale, and finally the investor disbursements.

Since these multi-family properties are “Built-to-Sell,” investors get out as soon as the development of the project is complete, and the property has sold. And because these projects typically take less than two years to build, they are a good option for short-term investors.

Take Advantage of Los Angeles’ Lucrative Multi-Family Market

Building multi-family units on lots that were formerly zoned for single-family helps to ease the housing shortage, make housing more affordable for shared-living households, and generate enviable returns for investors!

Just as importantly, Gatsby offers a stable ownership structure, in which each investor becomes a member of the LLC that owns the property. This means that each investor owns a stake in the underlying real estate. And this is different from most crowdfunding platforms, in which investors only own a share of the debt financing the property.

When you invest with Gatsby, you get to own a piece of valuable Los Angeles real estate, with a low minimum investment, while leveraging Gatsby’s experts to handle every aspect of the deal for you.

While traditional multi-family investing in LA was cost-prohibitive, real estate syndication company, Gatsby Investment, make it possible for investors from across the US to get a piece of this hot market with a low minimum investment.

Schedule a call with a Gatsby representative today to learn more!

Should I Take a Student Loan or Pay Cash Out of Pocket?

It’s no secret that college in the US is expensive. Even after scholarships and financial aid programs, American parents and college students paid an average of $25,313 toward annual college costs, including tuition, fees, and room and board. Whether you’re going to school yourself, or you’re looking at options for your children, you have a difficult financial decision to make: should you take a student loan or pay cash out of pocket?

To answer this question, we’re going to start by assuming that both options are available to you. You have the cash available to pay now, and you can qualify for a student loan if you opt for that route. Given those assumptions, which is the better option: paying out of pocket or taking a student loan?

The Case for Paying Cash for College

Many financial “experts” say you should always pay with cash when possible. They apply this rule to all debts, including credit cards, auto loans, home loans, and yes, student loans. The idea is to keep your debt to the absolute minimum and to work to pay off any necessary loans as quickly as possible so you can live “debt-free.”

On the surface, this makes sense. Loans charge interest, and interest expenses can add up.

Let’s say you take out a $100,000 loan with a 6% interest rate to cover tuition plus room and board for a four-year university. With a 10-year repayment plan, you’d be looking at over $33,225 in interest. Yikes!

By paying cash, you eliminate interest charges. But that’s not the whole story. There’s more to the question of student loans vs. paying out of pocket than just saving on interest.

The Case for Taking Student Loans

If you’re paying cash for your own education, or that of your child(ren), you’re going to be investing a large sum of money upfront. Paying out of pocket means sacrificing other financial goals, such as investing. And this is a bigger problem than most students and parents realize.

Take a moment to consider the opportunity cost of paying cash for college. Your money is sent off to the university, and you’re unable to invest it for the future. But what if you took a student loan and invested your cash instead of using it to pay for school out of pocket?

Let’s say you invest the $100,000 you would have spent on education in a passive real estate syndication project (these are projects that pool funds from multiple investors and are professionally managed by a real estate sponsor).

Real estate syndication can be extremely lucrative. Projects managed by Gatsby Investment, for example, have returned average annualized yields of 23% since 2017! Over the next 10 years, at 23% per year, compounded annually, your $100,000 would turn into $792,595.

This means that even after you pay off the $100,000 student loan plus the $33,225 interest, you would have made $659,370 by investing your money rather than paying cash for college.

Break the Pattern of Paying Cash and Missing Opportunities

Many Americans never get to the point where they can start investing. They buy a car, buy a home, pay for daycare, and pay for higher education for the kids. People who are constantly paying for things in cash never find the funds to invest. And, once retirement is in sight, they realize they don’t have the money needed to retire.

By making investing a priority, you can break this pattern.

Leverage low interest debts (like home mortgages and student loans) to pay for high-value assets. Then, invest in projects with strong returns, which will fully cover your debts plus interest, and put money back in your pocket!

Hot Lead-Gen Opportunities for Real Estate Agents in Los Angeles

With so many active real estate agents and brokers in Los Angeles, the competition for buyer and seller leads is fierce. But with a little creativity, you can find interesting ways to reach prospective clients and convert them to closings!

Here are five hot lead-gen opportunities for real estate agents in Los Angeles.

1. Host a Seminar, Workshop, or Course

Seminars and workshops allow you to position yourself as an authority in the space while introducing you to potential buyers, sellers, and investors.

There are so many options here:

First-Time Homebuyer Seminars
Home Seller Staging Workshops
Real Estate Investing 101 Course

You can offer your seminar, workshop, or course in person or online. Make it free if you want to cast a wide net or charge a fee if you want to limit your audience to serious prospects.

Don’t forget to record the presentation so you can use snippets for YouTube videos and social media reels!

2. Organize a Community Improvement Project

Local improvement projects help showcase your investment in the community you're selling people on. Can you think of anything you can do to improve your community?

Maybe there’s an empty lot that desperately needs cleaning. Or vacant storefronts that could use a fresh coat of paint (sure, it’s the property owner’s responsibility, but they might not have the physical ability or means to paint).

Or, get this, what if you get a team of volunteers to meet regularly to replace lightbulbs, weed lawns, and repair broken fences for senior and differently-abled homeowners who can’t maintain their homes on their own?

Any improvement project is a chance to establish your reputation as someone who cares about the community while meeting homeowners, local business owners, and/or other volunteers.

Of course, you can also share the experience on social. Maybe even get in the local news cycle!

3. Review Property Tax Assessments for Homeowners

The average homeowner doesn’t know how much their home is worth at any given time. So when they get a notice from the tax assessor saying that their value has gone up $50,000 since last year, and their tax bill will go up accordingly, most don’t question it. But assessors are often wrong because they apply a general formula to a wide region instead of assessing individual homes.

So here’s what you do: every July when new assessed values are released in LA County, you go to the Assessor’s website to review the values for your previous buyers (and any other strategic market you want). With your market knowledge, you can quickly tell by looking at the assessed value per square foot if the assessed value is a fair number for the neighborhood.

If the assessed value is fair (or mercifully low), you can let the homeowner know that you completed a complimentary review of their property taxes and have confirmed that the value is fair. If it’s high, you can alert your homeowner so they can appeal the value themselves or hire you to do it! Making money in property tax appeals is surprisingly easy for real estate businesses. Just offering complimentary annual reviews is a smart way to stand out and a unique way to nurture potential seller leads!

4. Blog (Yes, Even in the Mid-2020s)

Imagine this: You publish an article on your site called “The 10 Best Neighborhoods for Homebuyers in Los Angeles”. A serious buyer searches online for the “best neighborhood to buy a home in LA,” and your website shows up on the first page of their search results. So the buyer reads your article, is blown away by your local market knowledge, and texts you to schedule a consultation.

This is the power of blogging. Every blog post you publish gives search engines, like Google, more content to index on your website. And this increases the chances that search engines will send traffic to your website.

Here’s the best part: a single article you spend a few hours writing can serve as a lead generator for years to come! Don’t sleep on blogging for real estate lead generation!

5. Partner with a Real Estate Syndication Company

Real estate syndication companies can be an amazing source of repeat business for LA-area agents and brokers. Syndication companies, sometimes called crowdfunding platforms or real estate sponsors, complete real estate projects on behalf of groups of investors.

Take Gatsby Investment, for example. This Beverly Hills-based syndication company has completed over 100 deals in Los Angeles! Gatsby is always looking for new acquisitions to continue the flow of deals to investors. And Gatsby allows LA-area real estate brokers and agents to submit suitable properties for consideration online. You could potentially earn a commission or referral fee on the acquisition of the property and the sale of the property upon completion of the project.

Time to Take Action

Lead-gen in real estate is about taking action. So choose the topic for your first seminar, publish your first blog post, or submit your first deal to a syndication company TODAY!

Gatsby Investment’s Formula for Success in an Evolving Housing Market

As we have just entered a new year, we wanted to give you an overview of our 2023 real estate investment performance as well as a sneak peek at our plans for 2024.

There’s no denying that 2023 was one of the hardest years we’ve seen in real estate since the 2008 recession. Mortgage interest rates nearly doubled from 2022 to 2023. We experienced high inflation, over-priced listings, and an extremely low supply of homes available. Gatsby Investment had to work harder and smarter than ever before to find deals with strong enough profit margins for our investors. We pushed our limits in every way to make our projects as successful as possible.

Many of the top real estate syndication companies in the country reported losses to their investors in 2023. These companies couldn’t pivot quickly enough to adequately deal with the interest rate changes, lack of inventory, or drop in demand for commercial spaces.

Despite the challenging conditions of 2023, Gatsby Investment is proud to report another year of 100% profitable deals! We managed to return an annualized average of 15.69% to our investors in 2023. And we found 16 new projects that met our strict requirements and acquired them for our investors.

A combination of factors contributed to our success in 2023 and continues to set Gatsby apart from othersyndicates. First, we have a strong market niche, focusing on high-demand property types and ground-up construction projects with high return potential in Los Angeles. Secondly, we shifted to smaller builds that can be completed quickly and appeal to a larger pool of buyers. Finally, our experienced industry professionals and proprietary software streamlined each project from start to finish, maximizing return potential.

Our plan for 2024 is to continue focusing on value-add and ground-up construction projects to force appreciation and limited risk for our investors.

At this point, the Federal Reserve has signaled an end to the interest rate hikes. This has incentivized more buyers to enter the market and encouraged more property owners to consider selling. This is a good sign that the most challenging phase of this market cycle is behind us. We have already started partnering with local real estate agents, brokers, and developers to find new deals throughout LA in the coming year.

We hope to see more inventory, offer more deals to investors, and produce higher returns in 2024!

As we all know, it is impossible to perfectly time the real estate market; by the time you think the timing is right; it’s already too late. That’s why Gatsby believes in consistent investing and focusing on strategies that make the most of variable market conditions.

We appreciate your trust in us as your local real estate investment experts. And we look forward to serving existing investors and new investors in 2024!

View our current investment opportunities and get started today.

Real Estate and the Blockchain: Getting One Step Closer to One-Click Real Estate Deals

When I purchased my first investment property in 2012, it took 30 days to go from contract to closing. And it cost nearly $20,000 in fees to facilitate the transaction. I’m not talking about the down payment. This was just the amount to cover closing costs.

If you’ve ever purchased a home or investment property, this probably sounds familiar.

Transferring real estate is currently a complex, expensive process involving multiple intermediaries to review and validate every step of the transaction. During that 30 to 60-day transfer period, you have:

Home inspectors to confirm the condition of the property,
Appraisers to confirm the value,
Title reps to research the ownership and confirm that the property can legally be transferred,
Escrow officers to hold the earnest money deposit and distribute it according to the contract,
Real estate agents to negotiate on behalf of buyers and sellers and coordinate the many moving parts,
Loan officers to approve mortgage applications and issue the funds,
County clerks to record the transfer of the deed,
Etc., etc., etc.

But what if you could purchase a property with one click? Imagine the time, money, and energy this would save.

This is the ambitious promise of the blockchain. And we’re already seeing the early stages of this new reality.

In this article, we’re exploring real estate and the blockchain. We’ll show you how the blockchain can theoretically facilitate one-click real estate transactions. We’ll explain what this means for real estate investors. And we’ll show you how you can become an early adopter of this industry-changing tech!

What is the Blockchain?

Very simply, a blockchain is an online accounting ledger.

This ledger is “decentralized,” meaning that copies are simultaneously stored on thousands of servers worldwide. This prevents cyberhackers from changing data on the ledger; any attempt to falsify one copy would immediately be caught by the thousands of identical copies and disregarded.

We often talk about “the blockchain,” referring to the technology that makes this type of tracking possible. But, in actuality, there are many different blockchains, each keeping track of the transactions facilitated by their platform. For example, the Bitcoin blockchain specifically tracks transactions facilitated by this digital currency. The Ethereum blockchain does the same for transactions using the digital currency, Ether.

Blockchains track the flow of these digital currencies, which are often held anonymously, with ownership identified only by long strings of unique text.

How Blockchains Use “Smart Contracts” to Facilitate Real Estate Deals

Here’s where it gets interesting.

Some blockchain platforms support smart contracts. Smart contracts are self-executing contracts that are programmed into the blockchain. For example, a computer code can be written to automatically transfer the deed from seller to buyer upon receipt of the funds for the purchase of a property.

To do this, we just need to link real-world assets, like specific properties, into digital assets that can be recognized by computer code. This process is called “tokenizing” because you’re creating a digital token to represent an asset.

You may have heard the term NFT (which stands for non-fungible token) in connection with blockchain technology. You might even have a negative association with NFTs because of the boom and subsequent bust of digital artwork being sold as NFTs in the early 2020s. But an NFT is simply a unique digital code used to identify a unique digital asset.

When a property owner creates an NFT for their real property, they generate a unique digital identifier for their property that can be used in programming a smart contract.

And property owners are already doing this in 2023 using platforms like Propy. In fact, there have been multiple homes sold as NFTs in the US over the last few years!

The Future of One-Click Real Estate Deals on the BlockChain

We’ve just covered a lot of tech jargon, so it’s probably helpful to stop with the theoretical techie talk and see what a real estate deal would look like on the blockchain.

Imagine this…

You want to buy a rental property. The current owner has already tokenized the property so it can be recognized as a unique digital asset on the blockchain. As part of the tokenization process, clear title has already been confirmed. A licensed home inspector has recently evaluated the structure, and the inspection report is available online. You’ve taken a virtual tour of the home and confirmed that the property is a good deal. So you click “Buy Now.” Three things happen instantaneously:

The funds are transferred from your digital wallet to the seller’s,
This triggers the preprogrammed smart contract to automatically transfer the title from the seller to you,
A deed is instantaneously generated and sent to your County Clerk to confirm the ownership change.

No escrow officer, title rep, or real estate agent needed to be involved, and there was no lengthy contract period!

Naturally, the process would be complicated if financing had been needed. But even mortgage loans can potentially be accommodated by smart contracts. Fintech companies, like Klarna, are already providing installment payments for purchases through online platforms.

So this type of one-click real estate purchase is more manageable than you might expect, even with today’s existing technology!

Big Benefits of Blockchain Real Estate Transactions

Here are some of the key advantages provided by blockchain-supported real estate deals.

Faster closings. You can potentially close the deal instantaneously.
Lower fees. With fewer intermediaries needed to validate the transfer, both sellers and buyers can reduce their transaction fees and closing costs.
Increased liquidity. Streamlining the transfer process makes it easier to buy and sell properties, which makes real estate a more liquid investment.
Simplified fractional ownership. Fractional ownership can be messy in the real world, but by tokenizing shares of ownership, it is easier to buy, hold, or sell a fractional stake in a real estate deal.

Early Concerns About Using Blockchain Tech in Real Estate

While the tech needed to facilitate one-click real estate purchases on the blockchain already exists, it will take the industry some time to catch up and become comfortable with the technological capabilities. Here are some of the concerns about using blockchain tech in real estate at this stage.

Cyber security. While the decentralized nature of the blockchain makes a ledger attack nearly impossible, hackers may be able to access individual digital wallets, potentially conducting transactions without the owner’s knowledge or consent.
No take-backs. Unlike popular online marketplaces (like Etsy or eBay, for example), blockchain has no governing body. If you accidentally transfer money to the wrong party, there is no entity to file a dispute with. You might not even be able to identify the receiver of the funds to request a return of those funds.
County record discrepancies. Until county records offices are digitized to communicate with blockchain ownership transfers, the owner in the county’s books might not match the owner recorded on the blockchain.

Safer Options for Investing in Real Estate Online

Having the technology available is one thing. Trusting the tech and knowing how to actually use it is something else entirely.

If you’re interested in quick and easy real estate transactions, but you’re not ready to fully embrace real estate NFTs on the blockchain, consider investing in real estate virtually with Gatsby Investment.

Gatsby Investment is a California-based real estate investment company. Our user-friendly online platform makes it easy to review available real estate deals and place investments. Every project offered on our platform has been pre-screened for return potential by our expert real estate analysts. Each deal is also professionally managed by our experienced team of architects, builders, designers, and marketers. And, because we specialize in fractional ownership via crowdfunding and syndication, you can buy into a deal for much less than it would cost to finance a deal on your own!

Learn more about investing with Gatsby, and experience the future of real estate investing today!

Real Estate Investing Options for Millennials Who Can’t Afford to Buy a Home

Homeownership is a critical step in gaining financial freedom. In fact, a 2021 report by the National Association of REALTORS found that homeowners gained around $225,000 in wealth from 2011 to 2021 simply by owning a home.

But, let’s be real. With higher-than-normal interest rates and the price increases of the last few years, homeownership has become less accessible for many millennial buyers.

Many of us can’t afford to buy a home, even though we’re well aware of the many benefits of property ownership, like appreciation and tax breaks.

In this article, we’re exploring three real estate investing options for millennials who can’t afford to buy a house. We’ll also give you the benefits and considerations of each of these options.

Who knows…with some smart real estate investing, you might build enough wealth to purchase your own home sooner than you think!

3 Real Estate Investing Options for Millennials Who Can’t Afford to Buy a Home

No down payment? No problem. Here are three ways you can invest in real estate without shouldering the financial burden of direct ownership alone.

1. House Hacking

If your heart is set on owning your home but can’t quite swing the mortgage payments alone, house hacking might be your ticket to affordable homeownership. House hacking is when you generate passive income from your own home. This can be done by renting out a spare room, storage space, or parking spots.

Some enterprising house hackers are even purchasing multi-family properties and using the rental income from the other units to cover the full mortgage payment, including the unit they live in! The purchase price and down payment may be higher on a multi-family property, but with the rental income potential, this could still be financially favorable over buying a single-family home. Plus, if you qualify for a VA or USDA loan, you might be able to purchase a property with up to four units for 0% down as long as you live in one of the units.

Benefits of House Hacking

The advantages of house hacking for millennial investors include:

A path to homeownership. House hacking could help you get on the property ladder.
Lower personal housing costs since your mortgage payments can be offset by rental income.
An education in property management.
Favorable financing compared to buying an investment property that you don’t live in.
Potential for rental income growth over time. With each passing year, you may be able to charge a bit more.

Things to Consider Before House Hacking

Before you purchase a property with the intention of house hacking, consider the following:

Are you comfortable sharing your space?
Is there a demand for the space you’re planning to rent out?
Will you be disciplined enough to set aside a portion of the rental income for future repairs or vacancies?

2. REITs

REITs (Real Estate Investment Trusts) allow you to invest in income-generating real estate without actually owning property. REITs are companies that own income-producing properties (like apartments, offices, storefronts, etc.). You can purchase shares in a REIT, which entitles you to a percentage of the company’s profits.

Benefits of REITs

There are several advantages to investing in REITs, including:

Low minimum investment amounts. You may be able to get started with around $500.
Greater flexibility than direct ownership, since it’s easier to sell shares of a REIT than to sell a property.
Very little time commitment. You only need to spend a bit of time researching REITs to choose the one you want. Then place your investment and check in on it periodically.
Automatic diversification. Since a REIT owns multiple properties, your investment is spread among different assets. This protects your portfolio from the underperformance of any one asset.

Things to Consider Before Investing in REITs

Before you purchase shares in a REIT, consider the following:

Are you comfortable not knowing exactly which properties are owned by your REIT or how the individual assets are performing?
Will you be happy with the rates of return? Or would you rather look for another investment with higher return potential?

3. Real Estate Crowdfunding/Syndication

Real estate crowdfunding and real estate syndication are very similar models of real estate investing. Both methods pool funds from multiple investors to finance specific real estate projects. The primary difference between crowdfunding and syndication is the ownership structure. With syndication, you get a more stable structure in which all investors become members of the LLC or trust that owns the property. This means you have an ownership stake in the underlying real estate.

Crowdfunding and syndication cover a wide range of real estate projects including:

In most cases, you get to choose the specific property you wish to invest in, giving you more control than you would have in a REIT.

Benefits of Crowdfunding/Syndication

The main benefits of crowdfunding and syndication include:

Access to bigger, more valuable projects than you could finance alone.
Flexibility. You can choose from short-term flips or longer-term rental holdings.
Deal-by-deal control. You typically get to choose individual projects to invest in.
Competitive Returns. Depending on the projects you choose, you can potentially outperform the market.

Things to Consider Before Investing in Crowdfunding/Syndication

Before you buy into a crowdfunded or syndicated deal, consider the following:

Which crowdfunding platform should you use? Make sure to read up on the key factors to consider when choosing a crowdfunding service.
Can you commit to the project timeline? Your investment may be tied up for 6-24 months for a renovation or development project. Long-term rental investments may require a commitment of 5-10 years.

Start Your Real Estate Investment Journey

Every big adventure starts with one step. So take your first step today!

You can call a local real estate agent to ask about small multi-family properties that might qualify for a 0% down USDA loan, for example. Or research REIT options. Or choose a crowdfunding service to invest with.

Then keep investing, learning, and growing until you’re exactly where you want to be.

Luxury Real Estate Investment Fails

You may know Bel Air as an elite Los Angeles neighborhood, one that has been home to stars like Beyoncé, Michael Jackson, Taylor Swift, and Lady Gaga. And the Fresh Prince, of course (can you still sing the theme song?).

Residential development in Bel Air has made millions for tuned-in real estate investors. But in recent years, there has been a string of luxury real estate investment fails in Bel Air. Three deals in particular have been making headlines. They were each projected to be worth over $85 million upon completion. Now this is a story all about how these deals got flip-turned upside down…

Let’s take a look at the results of these disaster deals, analyze what went wrong, and help you avoid making the same mistakes in luxury real estate.

Hadid Mansion - Bel Air, CA

Of the fails on this list, this is the only one that had to be demolished by court order.

Mohamed Hadid, established real estate developer (and father to models Gigi and Bella Hadid) was granted city approval to build a 15,000-square-foot mansion on a 1.2-acre lot he purchased in Bel Air in 2011. Instead, he began constructing a 30,000-square-foot behemoth that also exceeded height restrictions for the area. The structure included a massive wine cellar and a 70-seat IMAX theater that were not in the approved plans.

Hadid was criminally charged in 2017 for this construction stunt. He pleaded “no contest,” paying nominal fees of around $3,000 and being ordered to serve 200 hours of community service. This stopped construction, but it wasn’t the end of the saga. Concerned neighbors sued in 2018 over worries that the oversized structure was compromising the integrity of the hillside on which it was being built. The judge agreed that the property posed a risk to the area. The neighbors were awarded nearly $3 million, and a judge ordered the property to be demolished.

The property was expected to be worth around $100,000 million when complete. Instead, it sold for $5 million at auction in December 2021, with the agreement that the buyer would demolish the property within nine months of closing because Hadid claimed to be unable to cover the cost. The demolition reportedly cost around $5 million, but it may pay off for the current owners as the razed site is now on the market for $18 million.

The lesson: Respect the permit process.

777 Sarbonne - Bel Air, CA

Alex Khadavi, a local cosmetic doctor and speculative real estate investor purchased the property at 777 Sarbonne Road in Bel Air for $16 million in 2013. After investing an estimated $30 million in developing an over-the-top luxury estate, using mostly debt financing from multiple creditors, Khadavi was forced to file bankruptcy and sell the asset in 2021.

The contemporary mansion, with its “extra gold” Calcutta marble, hydraulic-lifted DJ booth, and NFT art gallery, generated zero interest at the list price of $87.78 million. So it went to auction with a reserve of $50 million.

Interestingly, the reserve was not met, with the high bid coming in just under $45.8 million. Typically, when the reserve is not met, the bid is not accepted, and the owner retains possession. However, with Khadavi having filed bankruptcy, the bid was approved by a bankruptcy judge, despite failure to meet the reserve. Records from the LA County Tax Assessor’s office confirm that the deal was finalized on June 1, 2022, with an official sales price of $45,760,450.

The lessons: Don’t over improve, and be cautious with financing.

The One - Bel Air, CA

A 105,000-square-foot mega mansion, dubbed “The One” recently sold for $126 million at auction. According to Sotheby’s Concierge Auctions, this price was "more than double the highest US sale at auction and nearly 50% higher than the world record." And yet, it is widely considered to be a local real estate fail…

Widely considered to be the largest modern single-family residence in the US, The One is an impressive feat of construction, developed by film producer/real estate developer Nile Niami. With 26 bedrooms, 42 bathrooms, a 10,000-square-foot sky deck, cigar lounge, wine cellar, full-service spa, bowling alley, movie theatre, nightclub, tennis court, putting green, and five (yes, five) swimming pools, this is more of a resort than a home.

The One was designed and built to be the most expensive property ever sold, with an estimated after-construction value of $500 million. But the scope of this ambitious project created difficulties, with multiple delays in permitting and construction and unsustainable cost overruns. In 2021, after nearly 10 years of construction, the property was placed in court-ordered receivership, and bankruptcy was filed shortly after.

In 2022, the property was listed for $295 millions, which would have still made it the most expensive sale in history, just passing the $250 million record-holder in Manhattan. But, ultimately, The One was sold at auction for a deeply disappointing $126 million.

Niami estimated his losses on the deal at $44 million “and 10 years of my life.”

The lesson: Make sure there is adequate demand for your finished product.

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Gatsby Investment’s Track Record

Since our founding in 2016, Gatsby Investment has successfully acquired over 85 properties as of today. We proudly maintain a 100% profitable track record, with no losses on any deal to date. View completed deals

19k+

Registered members on the platform

22%

Average annualized net return to investors from 2016–2024

Successfully acquired deals