Multi-Family Build-to-Rent Information
This unique build-to-rent investment model from Gatsby Investment provides the benefits of both a new multi-family development and a multi-family rental in one investment!
By investing in the project pre-build, you get to build equity in the property, defer taxes on those gains by continuing your investment into the rental holding phase, and then generate passive cash flow from the rental income, as well as benefit from property appreciation over time.
Beginning with new construction offers multiple advantages over buying an existing multi-family rental. First, we have control over the architecture and design, allowing us to create spaces that will appeal to today’s renters. And, by building from the ground up, we create instant additional value and build equity in the property before moving into the rental phase.
This well-designed investment model has been created to maximize our investors’ ROI. And this is a great option for investors looking to build a passive, long-term portfolio.
The benefits of investing in multi-family build-to-rent
Unique investment model.
This model combines the benefits of new multi-family development plus the benefits of multi-family rentals. You get passive cash flow, property appreciation, tax benefits, and maximized returns!Passive investment.
You won’t need to analyze properties, oversee construction, find renters, or collect rents. Gatsby’s experienced team of well-qualified professionals will handle every detail of the acquisition, build, and ongoing rental management for you. You get to leverage our skills and knowledge to maximize your ROI.Cash flow.
Quarterly disbursements from rental income. Tenants pay monthly rent to help cover property expenses and can provide profit to the investors.Possible cash-out refinancing.
Gatsby will review the mortgage loan every five years to determine if current interest rates and property appreciation warrant refinancing. If a cash-out refinance makes financial sense, we can pull equity out of the deal to disburse back to investors.Choosing the right lot
At Gatsby Investment, we only accept the deals with the greatest return potential. Our real estate analysts are highly selective when looking for a deal. We review hundreds of properties to find a single property to pursue.
Choosing the right lot and location is critical to the success of a multi-family build-to-rent project. Recent zoning changes have made it possible to build multi-family structures on lots that were once zoned as single-family. Not only does this help alleviate the strains of the housing shortage, but it also provides an exceptional opportunity for real estate investors. In many cases, we are able to buy a comparatively low-cost single-family home, tear it down, and then build a multi-family property from the ground up.
With heavy buyer competition, Gatsby relies on long-established industry connections to find deals that the average investor may not have access to. We work with hundreds of local real estate brokers, and the majority of the time we find off-market deals that can be acquired below market value. By buying right, we can maximize return potential for investors.
Every Gatsby project goes through a comprehensive due diligence process, designed to mitigate any risk, and maximize investor returns.
Securing the property
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.
Building the property
Our architects create modern multi-family structures, tailored to the specific lot and designed to appeal to today’s renters.
The standard multi-family build starts by preparing the lot for the new construction. In many cases, a distressed single-family structure is torn down to make way for the new multi-family structure.
Gatsby’s properties are unique in that we build large living spaces to meet market demand for roommate situations and large families who choose to rent. Co-living with multiple roommates has become popular in Los Angeles, which has increased the demand for properties with more than two bedrooms. And since more families also choose to rent rather than buy, these families need affordable, spacious, and practical living spaces that can accommodate the whole family. Since many of the older properties in Los Angeles have only one or two bedrooms, Gatsby has found a competitive advantage in creating multi-family apartments with three to five bedrooms per unit.
Every step of the construction process is managed by Gatsby. From design and permit, demolition and construction, to the finishes. Our skilled workers confirm that every detail of the build matches our high standards. Because we have a large building team, we can minimize the time it takes to complete a project, while maintaining high quality. And, because of the volume of Gatsby projects, we’re able to negotiate deals on labor and materials and get better pricing. This all adds up to greater return potential for our investors.
We keep investors up to date through the user-friendly online dashboard where we display the project’s progress bar and upload photos of the construction progress. We also send email updates when the project moves from one status to another.
Transitioning to a rental holding
When construction is complete, we find qualified tenants for each unit and get the property stabilized. Then, we order an appraisal to confirm the value of the newly built property and refinance the loan.
Investors will now benefit from regular passive cash flow and long-term appreciation of the new asset throughout the rental phase of the investment.
The best part is that investors don’t have to invest any time or energy in the project to receive the benefits. Our professional property management team will handle the day-to-day operations for you.
See our value-add multi-family page for more information on rentals.
The option to sell your share every five years
The intention of the multi-family build-to-rent is to hold the property for the long term, allowing investors to build a portfolio of rental properties that grows their net worth year over year. Gatsby does not intend to sell these assets.
But to provide flexibility to investors, we offer the option to exit the investment every five years by selling your share in the property. We would then advertise your share for sale on the website, and new investors would have a chance to purchase your share based on the property’s new appraised value.
By staying in the investment, you will continue to benefit from quarterly disbursements and additional property appreciation over time. Additionally, by staying in the investment, you could potentially receive a portion of your original investment back. Every five years, we will review interest rates and appreciation growth to determine if we should refinance the property to pull money out of the deal and return a portion of the original investments back to investors.
Timeframe
The multi-family build-to-rent project is approximately a seven-year investment.
The development phase of the project typically ranges from 18-24 months. After that, the property is stabilized with qualified renters. Then the rental period will be for five years. With Gatsby, you’ll receive your share of any rental income each quarter throughout the rental holding period.
Investor distributions are prorated based on the time you invest in a project.
At the end of a five-year investment period, we will order a new property appraisal and calculate projected financials for the next five-year hold period. You will be able to review the projections before choosing if you want to exit the investment or continue for another five years.