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.

Gatsby Investment at the NYC Real Deal Showcase + Forum 2023

Gatsby Investment had the opportunity to sponsor the Real Deal Showcase + Forum 2023 at the Metropolitan Pavilion in New York on May 4, 2023. The showcase brought together more than 3,000 real estate professionals, developers, investors, brokers, owners, architects, exhibitors and sponsors for a day of exchanges and meetings on the current and future environment of the real estate market.

Speakers like Jody Durst, President of the Durst Organization, Marty Burger, President and CEO of Silverstein Properties, Inc., and Nathan Berman, Founding Director of Metro Loft, shared their views on the post-COVID era and the latest industry trends and news.

Gatsby Investment had the pleasure of sponsoring the event with Gatsby lanyards for all 3000 attendees.

Investing in Virtual Real Estate vs. Investing in Real Estate Virtually

As technology continues to advance, investors are naturally looking for new opportunities to grow and diversify their portfolios.

Investing in virtual real estate and investing in real estate virtually are two investment strategies that sound similar, but are actually very different. In this article, we will explore each strategy, explain the pros and cons of each, and show you how to get started in one, or both, of these exciting opportunities.

Investing in virtual real estate means buying a unique plot of "land" in a digital world. There are several digital worlds (also known as Metaverses) available, including Otherside, Decentraland, and The Sandbox. Each metaverse has a pre-determined number of plots available, and users can buy, own, and develop these plots with digital buildings, in much the same way that investors own plots of land in the real world and build physical structures.

Investing in real estate virtually, on the other hand, means investing in real-world real estate through online platforms. Real estate crowdfunding, for example, is one way to invest in real estate virtually. Crowdfunding platforms allow investors to pool their funds to invest in physical real estate projects like fix-and-flips or multi-family rentals.

Investing in virtual real estate comes with a few impressive benefits and a few serious drawbacks. The benefits include high return potential and no maintenance. With the Metaverse technology being so new, there is room for substantial gains in the virtual real estate market. In February 2022, the average virtual plot was selling for $16,300. For those who purchased plots at $500, this represents an unbelievable 3,106% ROI! And because the plots are virtual, owners don’t have to invest any time or money in maintenance.

Unfortunately, being so new, Metaverse investing is extremely volatile. While the average plot sold for over $16,000 in February 2022, that average price had fallen to just $3,300 by June 2022. There is also serious investor concern about the lack of tangibility with virtual real estate. Investors are essentially paying for a line of code, which has very little utility compared with the prospect of real-world real estate. Furthermore, it can be difficult to invest in virtual real estate, as each Metaverse has its own cryptocurrency (the general term for any digital currency), which requires the use of a third-party currency converter.

Investing in real estate virtually comes with its own advantages and potential disadvantages. One advantage is that investing in real estate virtually requires very little time, energy, or effort. When an investor uses a reputable platform or investment company, the due diligence will be completed by a team of real estate analysts, and an experienced sponsor will handle the management of the entire project on behalf of the investors. This allows investors to receive completely passive income from their real estate investments. The ability to leverage other investors’ funds is another key advantage. By pooling funds from multiple investors, each investor gains access to a property that could be more valuable than an individual investor could finance alone. These lower investment minimums also create diversification potential; rather than investing 100% of available funds in a single project, an investor can allocate their funds across multiple projects for easy diversification. And then there are also tax benefits to investing in real estate virtually.

The primary disadvantage of investing in real estate virtually is that the individual investor does not have full control over the asset as they would if they were the sole owner.

For those interested in investing in virtual real estate, online marketplaces and auctions are the best places to start looking. Sites like OpenSea enable investors to search through digital assets, place bets, and make purchases. Once a digital plot is purchased, investors can choose to hold it or develop it and rent it out.

Investing in real estate virtually can be done through online platforms. There are many platforms to choose from, and investors can choose wisely by following key factors to consider when choosing a crowdfunding platform, including track record, transparency, and communication.

Investing in virtual real estate and investing in real estate virtually both have their own pros and cons. If you are looking for a speculative investment that could bust just as easily as it could boom, virtual real estate investing could be a good fit for you. And if you’re looking for a less volatile investing method that can still provide substantial returns while limiting risk, investing in real estate virtually is likely the better fit for you.

Benefits of Value-Add Real Estate Investing

As the California real estate market corrects from the unsustainable growth of the pandemic era, investors are shifting their real estate investment strategies.

Yes, investors can always count on the long-term appreciation of real estate. But California investors can no longer rely on the steep, organic appreciation seen from 2020-2022. So, to maximize returns in CA’s stabilizing (or even temporarily declining) markets, investors are opting to force appreciation through value-add investing.

What is Value-Add Real Estate Investing?

Value-add real estate investing is when an investor finds a way to quickly and dramatically increase the value of a property. Value-add projects carry a low-to-moderate risk level while providing moderate-to-high returns.

There are several ways to add value to real estate, including renovating existing structures, changing the layout of an existing structure to meet current buyer and renter demands, and building an ADU (accessory dwelling unit) next to the main house.

These value-add projects are providing big benefits to investors statewide.

Value-Add Projects Can Generate Substantial Returns

Perhaps the greatest benefit of value-add projects is the impressive return potential. Investors who are willing to transform property can profit by selling the property for much more than their initial investment amount. The property’s after-repair value ends up being much greater than the sum of the purchase price and renovation costs, giving the investor a fair profit for their efforts.

Home flip projects with ADU additions can generate annualized returns of over 20%!

Value-Add Projects Can Be Short-Term

For investors looking to get in and out of a deal quickly, value-add projects can be completed in the short term.

Take a fix-and-flip project for example. By renovating a fixer-upper in a matter of months, an investor can potentially walk away with substantial returns without tying up their funds long-term.

Short-term projects offer greater freedom to investors who wish to have funds available in the next year or two for future expenses or other investment opportunities.

Value-Add Projects Can Also Improve Long-Term Cash Flows

Value-add projects can also serve investors who are happy to commit to long-term investments as a means of generating passive cash flows.

By adding value to an existing rental property, an investor can command higher rental rates throughout the useful life of the property. This means greater cash flows for years to come while simultaneously enjoying organic, long-term appreciation.

Just as importantly, the increased equity from the value-add on a rental property can be leveraged; investors can take out a home equity loan or HELOC (home equity line of credit) to fund additional real estate investments.

Cooling markets are no reason to stop investing in real estate. With a shift in strategy, your investments can continue to produce solid returns. And value-add investing may be just the shift your portfolio needs.

Saving vs. Investing: Inflation Edition

Saving money is often praised as a smart financial move. But is it really?

Did you know that saving cash during a period of inflation can actually cost you money?

What Happens to Savings During Inflation?

During inflation, everything gets more expensive. So each dollar saved buys less than it did the year (or month) before.

In 2022, we saw inflation hit 8%. This means that the average cost of goods and services increased by 8% compared to the year before. What did this do to savings? It reduced the purchasing power of each dollar by 8%. Suddenly, each dollar you had in the bank was worth more like 92 cents.

Now, what would happen if we saw an extended period of inflation?

Let’s say inflation averaged 8% over the next 10 years…

If you had $100,000 sitting in your bank account, not earning interest, it would be worth just $43,439 in 10 years. Yikes!

What Happens to Investments During Inflation?

Now, what happens if you invest your savings instead of simply sitting on a pile of cash?

During inflation, investments typically earn higher returns. With a smart, inflation-friendly investment (in real estate, for example), it’s possible to earn returns of 15% per year when inflation is high.

So, what if you invested your $100k in a real estate project (or series of projects) averaging 15% per year instead of letting it sit in a bank account?

At the end of 10 years, your $100k would be worth $404,556!

Do You Want $43,439 or $404,556?

Saving without investing costs you money during inflation. But investing earns you money - potentially lots of money!

So the choice is yours. Are you going to sit on your cash and watch its value drop? Or are you going to invest and watch your wealth grow?!

Exploring Los Angeles' Rental Culture: Insights for Real Estate Investors

Only 37% of Los Angeles residents own their homes. The remaining 63% rent. Compare this to California’s rental rate of 44%, or the national average rental rate of 35%, and it’s clear that LA is a culture of renters.

And this rental culture is becoming more deeply ingrained. According to US Census data, 54.5% of Angelinos rented back in 2000. That was still a high renter vs homeowner rate for the time. But this rate has steadily risen, with no reversing trend in sight.

In this article, we will explore Los Angeles’ rental culture to learn why the percentage of renters is dramatically high and growing. Then we will consider the implications for real estate investors in the LA market.

Homeownership is Both Less Accessible and Less Appealing

With median sales prices in LA hovering around $1 million, it takes a lot of cash to afford a home. Even those who find a $600,000 starter home and qualify for a 3% down conventional loan will need around $50,000 cash to cover the down payment plus closing costs. With a median household income of around $77,400, $50K is a lot of money, particularly when the cost of living is so high in LA.

But it’s not just the upfront cost proving a barrier to entry for today’s would-be buyers. It’s also the skewed financial ratios caused by student loan debt. The average student loan borrower owes nearly $30,000 on their student loan debts, creating both a cash flow issue because of the student loan payments and a debt-to-income ratio issue for potential mortgage lenders.

Furthermore, we’re starting to see generational renters. Research shows that children who are raised in rented homes or apartments are less likely to believe homeownership is a realistic possibility for them as adults.

Even as these obstacles continue to make homeownership less accessible, there is also a shift in the mindsets of many younger renters who prefer the flexibility of renting to the stability of ownership. The freedom to move with a month’s notice is of value to those who appreciate change and regularly seek new experiences.

Implications for Real Estate Investors

The high (and growing) rate of renters, combined with the high (and growing) rental rates, make Los Angeles an attractive market for real estate investors. And clever investors are finding ways to capitalize on LA’s rental culture.

For example, some investors are focusing on the co-living market by developing multi-family properties specifically for households with three or more roommates. Roommate-friendly design features like comparably-sized bedrooms, separate bathrooms, and large common rooms are in high demand by renters looking to save money by splitting the rent several ways.

Other investors are capitalizing on the need for family-friendly units. With the California housing shortage making it difficult for young families to find single-family homes for rent, more apartment buildings are catering to families by including onsite playgrounds and adding more 3+ bedrooms in their unit mixes.

The Future of Investing in Multi-Family Real Estate in LA

Seeing the increasing trend of long-term rentals and the profitability potential of multi-family investments, more investors are turning to real estate syndication to serve renters while capitalizing on high-yield opportunities.

Syndication pools capital from multiple investors to fund a single project. This allows investors to buy into a high-value deal with a fraction of the upfront capital they would need to acquire a property alone. Syndication is the future of multi-family investing.

The rental culture of LA is here to stay. Don’t miss out on the opportunities it provides.

Buying Real Estate in Different Market Conditions

The housing market never stays the same for long. Demand and supply rise and fall constantly. Even seasonal changes are noticeable. Like, homes sell faster and for more money in the spring and summer than in the winter and fall.

So because of these constant shifts, people are always trying to “time the market”, right? They want to buy low and sell high. But there are a few things wrong with that:

Timing the market is pure luck. You can’t know the market has peaked or bottomed out until after the fact. So if you just happened to buy at the bottom of a lull, you got lucky.
The price isn’t the only factor in getting a good deal. Things like interest rates and negotiating power make a huge difference in real estate.

Higher Interest Rates Can Offset Lower Prices (and Vice Versa!)

Think back to the peak-pandemic housing market - a lifetime ago, I know. LA County homes were averaging around $900k. Interest rates were still at a crazy-low 4%. That left new buyers with a mortgage payment of around $3,470.

That was about the time people started crying housing bubble, and claiming the market would implode. So, some investors decided to wait for a “market crash,” expecting to get a steal when prices dropped.

But what has actually happened?

Well, we have seen a market correction. During the winter lull, LA County home prices hovered around $715,000. Sounds like a dramatic dip, right? But, because of the 6% interest rates, the monthly mortgage payment for these “market crash” buyers is $3,463.

That’s right. These buyers lost out on two years of rental income to save $7/month.

There is No Wrong Time to Buy Real Estate

Now look, today’s buyers are still going to do just fine! They’ll start earning that passive rental income and watching the value of the property grow over the long term. In fact, since they bought at a lower price point, they’ll probably see their equity rise faster than those who have to recover from the value dip.

The point is…it doesn’t really matter when you buy because it’s always a good time to buy real estate!

Interest rates are low? Cool - that means you’ll spend less on interest expenses. Home prices are low? Cool - it’ll be easier to come up with the down payment and you’ll probably see strong equity growth.

There are good deals to be had in all market conditions. So if you’re interested in investing, take the leap now. As the saying goes, “Don’t wait to buy real estate. Buy real estate and wait.”

What $1 Million Buys in Los Angeles

In many housing markets across the country, a million dollars could buy a small mansion. But Los Angeles is a high-value market. And $1M isn’t what it used to be.

Pre-pandemic, the median sales price for homes in Los Angeles was $741,000 (as of January 2020). By January 2023, the median sales price was up to $921,750. This means that $1M in 2023 will buy you a slightly better-than-average home in the average LA neighborhood.

As of March 14, 2023, there are 68 single-family listings for sale within LA city limits with an asking price between $995,000 and $1,000,000. These range in size from 740 square feet to 3,229 square feet. They include everything from one-bed, one-bath condos to five-bed, three-bath homes. The oldest was built in 1895, and the newest is still under construction.

These listings are spread throughout the city from the Porter Ranch in the north to San Pedro in the south, from the Pacific Palisades in the West to Boyle Heights in the East. Naturally, home values vary dramatically by neighborhood. What $1M buys in Downtown LA will be very different from what $1M buys in Beverly Hills.

Location, Location, Location.

Several factors, like size, layout, condition, and views, impact home values. But no other factor is as important as location.

In the Pacific Palisades, for example, the median sales price is $3.3M, but you can find small one-bed, one-bath condos available for just under $1M. There are also mobile homes available in the Palisades for under $1M (currently listed for sale between $600,000 and $800,000).

In Downtown LA, on the other hand, the median sales price is sitting at just $595,000. A million dollars downtown could get you a spacious two-bed, two-bath condo downtown. But, with fewer single-family homes built in that area, you’re less likely to find an SFR for $1M in that neighborhood.

If you’re looking to purchase a single-family home for around a million dollars, the San Fernando Valley may be a good option. In Northridge, for example, the median sales price is $960,000. A $1M budget can get you a comfortable three-bed, two-bath home with a garage and a small yard.

Some LA Neighborhoods Don’t Offer Any Homes Under $1M

Some LA neighborhoods are so exclusive that there are no residences available under one million dollars.

Take Bel Air for example. The median sales price in Bel Air is $2.8M. The lowest-priced residence is a 1250-sq-ft 2-bed, 2-bath, listed at $1.25M. There is a vacant lot listed at $595,000, but most vacant lots are also priced at over $1M.

LA Neighborhoods With a Median Sales Price Around $1 Million

There are a few neighborhoods in Los Angeles where the most recently calculated median sales price is right around $1 million:

● Highland Park: $1,022,500

● Hollywood: $975,000

● Northridge: $960,000

● Valley Glen: $949,000

● Cypress Park: $907,000

What Will Happen to LA Prices in 2023?

The median sales prices reflected in this article are from the first quarter of 2023. Since home prices around LA tend to increase in the spring and summer, it is likely that values will be going up in the coming months. Then you can expect another dip as we enter the fourth quarter.

The good news for buyers is that values have come down a bit since the peak in the summer of 2022. However, with LA remaining in high demand, there is no market crash on the horizon. If you are interested in investing in Los Angeles real estate, now’s the time to do it.

What’s the Difference Between an Investor and a Business Owner?

Ok, so there are several differences between an investor and a business owner…

Take time and effort for example. While the owner is actively working on the business, spending 40 hours a week (or 60…maybe 80 hours in the early days), the investor gets to swoop in with a quick wire transfer, then get on with their lives until payday.

Or consider responsibility. The pressure of making the business successful falls on the business owner. If anything goes wrong, no one could possibly blame the investor! It would be the owner’s fault. The buck stops with the owner. Good owners know this and respect it. That’s why they spend every day doing everything in their power to make sure the business succeeds!

But today, we want to talk about another difference between an investor and a business owner that doesn’t get enough credit…

The investor gets paid first, and the business owner gets paid last.

That’s right. When the proceeds come in, the investor is the first one to receive their cut.

The business owner doesn’t get paid until everyone else on the list has gotten theirs.

So, the business owner takes on all the responsibility for the business idea and day-to-day operations. Plus, they’re the ones working insane hours to make the business a success (and keep it successful). And they only see the rewards of their efforts after all the other stakeholders have gotten their share.

Investors, on the other hand, put up some funding, then kick back and wait for their passive proceeds to roll in.

Want to make sure you’re in line to get paid first? Become an investor!

Gatsby’s real estate investment strategies for 2023

With rising interest rates, high inflation, stock market volatility, and uncertainties in the real estate market, we want to give you some insight into what our focus for the upcoming year will be, and explain how Gatsby’s property types continue to perform exceptionally well despite cooling market conditions.

Gatsby follows market trends closely, and our focus in 2023 will be on two specific short-term investment types:

Single-family house flips and
Multi-family new developments.

Both types will be built-to-sell, with time frames ranging from 6 to 24 months. This gives you a chance to grow your money while hedging against inflation, without tying up your money for a long period of time.

Here is a closer look at how each of these investment types works with the changing market conditions of 2023.

HOUSE FLIPS:

Gatsby’s house flips have a unique value-add proposition. Not only do we complete a full remodel of the main house, but we also build a brand new ADU on the property. This separate housing unit can provide future buyers with a residence for guests, aging parents, adult children, or as an on-site rental unit to generate passive income. Properties with ADUs are in exceptionally high demand because of the options they give buyers.

Additionally, Gatsby focuses on entry-level properties with affordable price points. Affordable homes are the most in-demand properties in Los Angeles. Therefore, even if property values are in a temporary state of decline, these in-demand properties are most likely to hold their value.

This strategy for meeting the high demand for affordable single-family homes with ADUs continues to make Gatsby’s flip projects incredibly successful. Most of our completed properties in the past year sold in under 30 days for more than the asking price!

MULTI-FAMILY DEVELOPMENTS:

Gatsby also has a unique strategy for developing multi-family properties. It starts with recent changes to zoning laws that were enacted to address the housing shortage in Los Angeles.

Southern California now allows certain single-family lots to be converted into multi-family developments to create more housing in central areas where it is needed most. This means we can purchase a single-family home, tear it down, then build a multi-family property on the lot. By turning a single-family home into a multi-family development of 4-10 units, we are able to maximize the return potential to our investors!

Another benefit of multi-family developments is that the sales price is based on rental income, which means multi-family listings are not as reliant on market conditions as single-family homes. Even if home values are dipping, rental prices generally remain steady (or may even increase). And buyers will look at these rental rates to determine the value of the property.

By tailoring our investment strategies to match buyer demand and capitalize on local legislative changes, Gatsby is able to consistently outperform the market!

To learn more about our investment opportunities, please contact us to schedule a call with one of our knowledgeable investment specialists.

We look forward to serving you in a prosperous 2023!

What is Inflation, What Causes it, and Why Does it Matter?

Since inflation affects the value of the dollar, inflation will cause the value of your savings to sink. Understanding how inflation work is crucial in order to know how to beat it.

What is inflation?

In simple words, inflation is an increase in prices or expenses over time. The rise in prices is often expressed as a percentage with the average year by year inflation rate of 3.27%. However, inflation recently hit a 40-year high.

According to the Bureau of Labor Statistics (BLS), in June 2022 inflation measured by the consumer price index (CPI) increased 9.1% over the prior 12 months. This is the highest inflation rate we have had since 1982.

What causes inflation?

Inflation rises when the Federal Reserve sets the interest rate too low or when the growth of money supply increases too fast.

High inflation can also be a result of a hot economy where people have extra cash and want to spend. If consumers are buying lots of goods, businesses may need to raise prices because they are lacking supply, or simply because they can increase their profits due to the high demand.

Some inflation is important for a growing economy, but too high inflation rate is a sign of an imbalanced economy.

Why is it important to keep up with inflation?

Inflation causes a loss of purchasing power over time, which means your dollar won’t be worth as much tomorrow as it is today.

With rising inflation, everything from groceries to cars become more expensive, and it may be harder for individuals to afford everyday essentials. If your income doesn't increase by at least the same rate of inflation, your salary will equal to less value than it did in the previous year. The same concept goes for your savings. If you are keeping money in your bank account, the money will lose value to inflation over time.

How to beat inflation with real estate?

The best way to keep up with inflation is to keep your money invested. The primary benefit of investing during inflation is to preserve your portfolio's value. The second benefit is that you can continue to grow your money.

Real estate is an ideal investment vehicle during inflation. Real assets naturally keep up with inflation since properties appreciate in value over time. With short-term, value-add real estate opportunities from Gatsby Investment, you can grow your savings while also serving as a hedge against inflation.

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A History of Strong Returns

Since our founding in 2016, Gatsby Investment has successfully acquired over 100 properties with a 100% profitable track record. View completed deals

500+

Active investors on the platform

22%

Average annualized net return to investors from 2016–2025

100

Successfully acquired deals