Gatsby now offers fund companies and investment firms the chance to invest in our deal-by-deal real estate projects alongside our investors. With our unique investment offerings and proven track record, we can offer fund companies greater diversification and flexibility in their funds’ portfolios.
Through our strategic value-add approach, we are able to offer higher-than-average returns to investors. And because we professionally handle every aspect of each deal from start to finish, your returns are completely passive!
How fund of funds investing works
Fund of funds investing is when one fund (any entity that pools money from multiple investors to purchase assets) invests in another fund.
With Gatsby’s fund of funds structure, the fund itself acts as the investor in the deals. When a fund invests as an equity investor in one of our properties, they have an ownership stake in the LLC that owns the property. Gatsby is the manager of the LLC, and the fund is a member of the LLC.
Gatsby handles each project from start to finish. We provide monthly updates on the status of the project and provide progress photos through our online dashboard. Once the project is complete, the initial investment plus any profit is disbursed back to the fund. At that point, the fund handles the distribution of proceeds to the investors in their fund.
Gatsby can accept investments from any fund in which all investors in the funds are accredited investors. Please note: If any investors in the fund are not verified as accredited, the fund will not be able to invest in our syndication deals.
Gatsby’s unique investment strategy
Most fund companies go after the large deals that make up 30% of the market because it is hard to find, manage, and develop multiple smaller projects simultaneously. Most companies are not set up for this level of project volume since each project requires a lengthy due diligence process and a lot of administrative work, leading to higher overhead costs. Therefore, funds with substantial capital tend to target fewer projects of larger scale instead, ultimately missing out on a lot of good opportunities.
Gatsby saw an opportunity to target the remaining 70% of the real estate market and found a way to handle the small to mid-sized investment projects in volume. While also making them available to investors!
By streamlining the process through our proprietary software, we can effectively automate workflow tasks like proforma calculations, online investment offerings, construction management, and tax filings, while keeping overhead costs low. This allows us to generate higher returns for investors.
And by partnering up with well-established developers and operators in different markets across the US, we can offer deal flow, diversification, and unique investment offerings to fund companies.
Reasons for funds to invest with Gatsby
There are several reasons why it makes good sense for funds to invest in Gatsby’s real estate projects, including:
Funds can invest with Gatsby as a way of diversifying their fund’s portfolio. Maybe your fund doesn’t have any real property holdings, and you want to use a percentage of your fund to capitalize on the real estate market. Or perhaps you are already investing in real estate, but your fund is too heavily invested in commercial, and you would like to incorporate residential. Or you might have too many long-term holdings and you’re looking to add some short-term real estate investment projects. In each case, you can invest a percentage of your fund with Gatsby to easily increase the real estate holdings in your portfolio.
With Gatsby’s flexible offerings, you can choose from value-add projects, ground-up developments, and multi-family rentals, each of which can help you create a more balanced fund portfolio.
Short-term real estate investments
Our short-term real estate investment projects provide unique benefits for fund of funds investors.
Our short-term options include house flips and smaller multi-family developments with hold periods ranging from 6-24 months. These projects offer a great opportunity to funds that want a more liquid investment option.
For example, let’s say your fund has raised the capital needed for your next investment project, but your project will not need all the money immediately. Instead of leaving your money in the fund uninvested, you could put this money to work with short-term options from Gatsby Investment. This allows you to grow the capital in the short term and have the money returned to the fund by the time you need it.
Put your overfunding to work
After you have already raised the capital for your investment fund, you may find that you raised more than you needed for your project. With excess cash on hand, you want to put this money to work for your investors, but it may not be enough capital to purchase a new property. Instead of allowing that capital to sit in a low-return account, you can invest it with Gatsby to generate higher returns for your investors.
With our low minimum investment amounts, you have an easy and accessible way to put extra capital to work.
No upfront fees
Unlike many other real estate crowdfunding and syndication platforms, Gatsby does not charge any upfront fees to the fund. Instead, Gatsby takes a service fee only from the profit. This means that the investment must be profitable for Gatsby to receive any compensation for their work.
Gatsby’s track record of success
From 2017 through 2022, Gatsby’s developments have provided an average annualized net return to investors of 24.22%. We continue to find ways to generate strong returns under any market conditions. And we’ve never had a deal fail to turn a profit!
There are three different investment types available for fund of funds investments: house flips, multi-family developments, and multi-family value-adds.
Funds have the option to invest in equity or debt. With the equity structure, you have an ownership stake in the underlying real estate. With the debt structure, you serve as a lender to the deal.
These value-add investments are built-to-sell and can be completed in 6-12 months with an estimated annualized return of 15%-20% for equity investors and 6%-8% for debt investors.
Learn more about our house flip opportunities
These opportunistic developments are built-to-sell and can be completed in 14-20 months with an estimated annualized return of 20%-25% for equity investors and 8%-10% for debt investors.
Learn more about our multi-family developments
Our multi-family rentals are existing properties with value-add potential that will be remodeled and held as rentals for 3-5 years. These have an estimated annualized IRR of 15%-20% for equity investors and 6%-8% annualized return for debt investors.
Learn more about our value-add multi-family projects