House Flip Information
Single-family house flips offer the opportunity to get in and out of a deal quickly with a low minimum investment amount and the potential for high returns.
The goal of our flip investments is to quickly add as much value as possible to the property, then sell it immediately. This way, we generate the highest annualized returns for our investors.
We specialize in flipping distressed single-family houses worth less than $1 million in the Los Angeles area. This price point is in exceptionally high demand in LA, as this is considered an affordable starter home in the valuable LA market.
We complete extensive interior and exterior renovations. And, to maximize the value of the property, we often build an ADU (a small additional housing unit behind the primary structure).
Single-family flips are our quickest projects, with timeframes ranging from just 6-12 months. This is ideal for investors who are looking for a short-term investment.
The benefits of investing in single-family house flips
Short terms.With the average flip taking 6-12 months, you can invest without tying up your capital for a long period. Flips can be a great way to diversify your portfolio with different investment timelines.
Low minimum investment amounts.Investors can buy into these single-family flip deals for as little as $10,000.
Deal-by-deal control.Our projects are offered on a deal-by-deal basis, which means that you choose exactly which property (or properties) you want to invest in.
Ownership of a piece of LA real estate.With Gatsby, you invest in equity (rather than just debt). This means you get an ownership stake in the underlying real estate.
Choosing the right property
A flip investment starts with finding the right property. There are many factors our analysts consider, including purchase price, transformation potential, and a lot large enough to accommodate an Accessory Dwelling Unit (ADU).
Through the industry connections Gatsby has built over our years in the business, we can land deals that individual investors would not have access to. Our investment properties can come from our relationships with hundreds of local brokers, or from nontraditional sources, including off-market properties, foreclosures, probate courts, and auctions.
We analyze hundreds of properties to find one property good enough to meet our high standards. Our careful due diligence process is designed to mitigate any risk and ensure the most profitable returns possible. Of the hundreds of properties we analyze, we typically complete due diligence work on around 25 houses.
The due diligence process includes
- Exploring the neighborhood to get a feel for the surrounding area,
- Running comps to establish the fair market value compared to recent sales,
- Reviewing rental income and vacancy rates,
- Researching zoning codes to see what we can build,
- Projecting transformation and value-add potential,
- And estimating the cost-to-build and expected return on investment.
Of the 25 homes we thoroughly analyze, we submit offers on only the top five. And because we insist on the most favorable terms, we often only get one of our five offers accepted by the seller.
Securing the property
When our offer has been accepted, our experts complete the final round of due diligence work. This is when we make sure the title to the property is clear, there are no permit restrictions, and there are no structural defects. If any red flags are found, we renegotiate the sales price or walk away from the deal.
When our real estate experts are satisfied that we have a winning property for our investors, we open the LLC in which the property will be held, secure any financing needed, complete all title and escrow documents, and successfully close the deal.
Renovating the property
Gatsby manages the renovation and building process from start to finish. Our experienced professionals cover every field of construction, including building, electrical, plumbing, roofing, and general contractor work.
To create a stunning before-and-after result, we work with award-winning architects, Landry Design Group, to create custom color combinations and designs.
The home will go through extensive interior and exterior renovations. Each house is unique, so we look for ways to add the most value based on the individual property’s needs. We may change the layout to create a more practical living space, upgrade the landscaping and hardscaping, and build a brand-new ADU (Accessory Dwelling Unit) from the ground up.
Since local zoning changes allowed single-family owners to build ADUs on their lots, building ADUs has become a proven concept for Gatsby. We now include an ADU build for the majority of our flip projects. This is one of the ways we can add so much value to the property in such a quick timeframe. By building a new structure on the property from the ground up, we create two separate housing units. Not only does this help combat the housing shortage in Southern California, but it also makes the property easier to sell. Properties with an ADU are in high demand as homebuyers can use the ADU as a guest house or even rent out the unit for passive income.
Because we have a proven system in place, we are able to complete builds in remarkable time. And because of the volume of projects we do, we can negotiate favorable labor and materials costs.
We keep investors up to date through the user-friendly online dashboard where we display the project’s progress bar and upload progress photos of the construction of the property. We also send email updates when the project moves from one status to another.
Selling the property
When the construction is complete, we take final photos of the property, list the property on the market for sale, and advertise it to qualified buyers. On average, homes in Los Angeles sell within 30-60 days.
A fix-and-flip project takes Gatsby around 6-12 months. The timeline starts the day we open purchase escrow. Then we follow the process of purchasing the home, designing and permitting, renovating and building, and advertising the property for sale. The timeline ends the day we close escrow on the sale of the home.
Investor distributions are prorated based on the time you invest in a project.