Investor Options with Gatsby Investment

By Michelle Clardie on 08/11/2021.
Reviewed by Dan Gatsby .
Gatsby Investment proudly offers four investor options to help you invest using the method that best suits your unique situation. 

You can invest:
1.        As an individual
2.        As a company
3.        As an international investor (outside the US) 
4.        Through your retirement account

Investing as an individual

Any individual who meets the accredited investor requirements can invest with Gatsby Investment as an individual. This means you’re taking sole responsibility for your investment.

The benefits of investing as an individual

The key benefit of investing as an individual is simplicity. No additional business entity information or retirement account information will be needed to create your account or get verified as an accredited investor. 

Potential downsides of investing as an individual

The biggest potential downside of investing as an individual is that you will personally assume any and all risk related to the investment. 

Investing as a company

You can invest under your legal company name as long as your business meets the accredited investor requirement of either:

1.        having at least $5 million in assets or

2.        Having all equity owners qualify as individual accredited investors.

In this case, your company will be the real estate syndication investor instead of you personally investing directly.

Only one company shareholder can invest per Gatsby Investment account. However, additional shareholders can invest through the same company by creating a separate Gatsby account and going through the accredited investor process themselves.

The benefits of investing as a company

When you invest as a company, the company assumes all risk. In the unlikely event that the investment returns a loss, the company would realize the loss. So, the loss would not impact your personal finances and your family's assets are protected.

Potential downsides of investing as a company

Investing as a company can add a layer of complexity to the accredited investor verification process, particularly if there are multiple shareholders. 

Then, when investing as a company, the profits will benefit the company, not your personal finances. Depending on your company structure, this may mean profits are distributed among multiple shareholders. If you are the sole owner, you’ll need to take the extra step of paying yourself the profits from the company accounts (if you intend to personally receive the financial benefits). You may want to speak with your accountant about potential income tax issues if you plan to move the profits from your business to yourself.

Investing as an international investor

Gatsby Investment is proud to make the American real estate market accessible for international investment. If you are not an American citizen, you can still invest by first creating an American business entity. As long as this newly created American company qualifies for accredited investor status (using currency conversion to make sure the financial requirements are met in US Dollars), the process is the same as investing as a company.

Just like a company formed by American citizens, you would be investing indirectly through the company. You would not be investing personally.

The benefits of investing as an international investor

The biggest benefit of this investor option is that it allows non-Americans to invest in the American real estate market. This comes with the side benefit of helping foreign citizens diversify their investment portfolios through American real estate syndication.

And, just like investing as a company, the company assumes the risk, leaving your personal finances unaffected.

Potential downsides of investing as a non-US citizen

Investing as a non-US citizen is more complicated than investing as an American individual simply because it requires creating a company from which to invest.

And since the returns will be issued to the company, you will need to find a way to pull your funds from the company if you want to personally benefit. This can create a complex international income tax situation. It is a good idea to speak to accountants in both the US and your home country before you proceed. 

Investing through a retirement account

Anyone who qualifies as an accredited investor has the option to invest through a retirement account, like an IRA or 401(k). This means the investment is held inside your retirement account and is subject to the IRS’s rules and regulations for retirement accounts.

There are a few rules specific to investing through a retirement account:

  1. You can only create one Gatsby Investment account per retirement fund. But, you can always create a separate investment account and select another investment option (like an individual account, company account, or another retirement fund account).
  2. All proceeds are disbursed to the retirement fund the investment funds came from. You will not have the option to change the account or have the funds transferred elsewhere.
  3. Gatsby Investment can only accept up to 25% of the total amount we are raising for each property from retirement accounts. The rest of the funds raised need to come from individual or company investors.  

We always advocate you seek out financial advice when using funds from your retirement account so that you fully understand any taxation or regulatory issues that could arise. 

The benefits of investing through a retirement account

The primary benefit of investing through a retirement account is that your disbursements from the investment to your retirement account grow tax-free. So when your retirement account receives a lump-sum payment for the sale of a successful fix-and-flip, the proceeds are not immediately taxed. Instead, they sit in your account, generating additional interest, helping to drive up the value of your retirement account. When done correctly, the only tax you’ll pay on this money is normal income tax as you start making regular withdrawals to cover living expenses in retirement.

The same is true when you invest in multi-family rental properties. Your monthly rental income disbursements grow tax-free in your retirement account. And when the property is sold, that lump sum will also grow tax-free until you hit retirement age and are ready to live off your retirement account withdrawals.

Potential downsides of investing through a retirement account

The big downside of investing through a retirement account is that you cannot access any of the proceeds before you hit the official retirement age of 59 years and 6 months old without incurring fees and penalties for early withdrawal. Your investment disbursements should remain untouched in your retirement account until then. 

Another potential downside of investing through a retirement account is the complexity. To use your retirement account to invest in real estate holdings, you must have a self-directed retirement account with a legal custodian, whose job is to keep the records for the account.

If you have any questions about using your retirement account to invest in real estate, ask a certified financial planner (CFP) to assist you.

Which is the best investor option for me?

If you’re looking for simplicity, investing as an individual is the easiest method. You’ll just need to be verified as an accredited investor, and you won’t need to provide business financials or retirement account records. Nor will you need to worry about disbursement limitations when the proceeds from your investment are available. 

If you’re looking to limit personal liability in your investment portfolio, investing as a company might be your best option.

Even if you're not a US citizen, you can still invest with Gatsby by forming an American business entity. Then the process is the same as investing as a company, with all the same benefits and the added advantage of making American real estate investing available to international investors.

And, finally, if you’re looking to capitalize on tax advantages, consider investing through your retirement account. Through this method, the proceeds from your investments will grow tax-free until you’re ready to make withdrawals from your retirement account.

How to start investing

Whichever investor option works best for you, Gatsby Investment is here to make the process of investing as stress-free and fun as possible. Our online signup system makes it easy to get started. And with our online portal, you get to watch the progress on each of your investment properties, complete with before and after photos. When you’re ready to invest, we’re ready to serve you. 

To start investing, take just a moment to sign up through our convenient online portal. Then you'll be able to choose your investments and become an investor with Gatsby Investment.

Investment opportunities