Multi-Family Development Information
Multi-family home developments are opportunistic real estate investments. For these projects, we build brand-new multi-family apartment buildings from the ground up.
Gatsby sources funds from multiple investors, which allows you to own a piece of a multi-family property without the financial burden of funding the development on your own.
Multi-family apartment buildings are in high demand in the Los Angeles market. Buildings with fewer units are in greater demand than larger apartment communities, so Gatsby focuses on developments of this size. This also helps us to shorten timeframes, which limits risk. These projects range from 18-24 months, which makes this the perfect opportunity for investors looking to grow their money without tying it up long-term.
Because of the substantial value added by building from the ground up, Gatsby’s multi-family developments historically have some of our highest yield returns.
The benefits of investing in multi-family development
High demand.Our multi-family floorplans are in exceptionally high demand, making it easy to find a qualified buyer for a quick sale once the development is complete.
Potential for above-average yields.New development projects have the highest return potential due to the value we add by building from the ground up.
Investment portfolio diversification.Our multi-family developments have a medium-term timeframe. This helps diversify any traditional short-term or long-term investment portfolios.
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.
Choosing the right lot
This investment starts by finding the right lot to build on. In some cases, we find suitable vacant lots, and in other cases, we purchase a lot with a distressed single-family structure that can be demolished to make way for the multi-family.
Our real estate experts analyze hundreds of properties before choosing one with the best potential. We start by finding strong neighborhoods, through a careful evaluation of local market values, rental pricing, and occupancy rates. Then we analyze specific properties, considering location, zoning code, lot size, and buildable square footage. We use our industry connections from years in the business to find the lots with the greatest potential and negotiate the best purchase terms. Our deals can come from our relationships with hundreds of local brokers, or from nontraditional sources, including off-market properties, foreclosures, probate courts, and auctions.
Every property goes through an extensive due diligence process before purchase. Our experts estimate the building costs in comparison to the after-construction value to ensure a profitable result.
To maximize returns and mitigate risk, we focus on developing small apartment buildings. Not only are smaller projects faster to build, but it’s also easier to get the required building permits. The shortened development timelines allow us to more accurately project returns. And smaller buildings are in higher demand because they appeal to a wide range of buyers. This means we can sell the building and distribute proceeds to investors faster.
Securing the property
We negotiate to buy the chosen property under favorable terms. We strive to get the lowest purchase price so that we have the greatest possible profit margin to work with. With our established relationships with local lenders, we can get better terms and lower interest rates on our construction loan. Because we build multiple projects each year, we are also able to negotiate favorable discounts on labor and materials for the construction.
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.
Designing the property
Gatsby’s multi-family developments are designed to meet the unique needs of today’s renters in Los Angeles.
Most apartments in LA are studios, one-bedroom, or two-bedroom. But rents have gotten so expensive that most individuals can’t afford to live alone (or even with a partner). Today’s renters are looking for three, four, or even five bedrooms so that they can have more roommates to make the rent more affordable.
Similarly, more growing families are renting today because they can’t afford to buy. These families are also looking for apartments that have enough space to accommodate multiple children plus a home office.
Gatsby is meeting these needs by working with experienced architects to design spaces that have open living areas, 3-5 bedrooms, and enough bathrooms to make co-living with roommates more comfortable. By designing properties that will be in high demand with renters, we make the property more valuable to the investors who will buy the property once it is built.
And, as one final touch to make sure the building is in high demand with investor-buyers, we choose amenities strategically. We avoid high-cost, high-maintenance amenities like pools, fitness centers, and elevators. And we include low-maintenance amenities that offer a competitive advantage, like extra parking, in-unit laundry, and rooftop decks.
Building the property
The build starts by preparing the lot for the new multi-family structure. This might mean tearing down distressed structures and grading the lot.
Once the permits are approved, our construction team can get to work building the carefully designed, modern multi-family building that will generate instant demand from renters and buyers.
With the skilled professionals and workers and the efficient systems we have in place, Gatsby can complete high-quality builds in comparatively short time frames, leading to less uncertainty, lower risk, and faster payouts for investors.
Throughout the development period, 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.
Selling the property
When the construction is complete, we take final photos of the property, then list the property on the market for sale, and advertise it to qualified buyers.
A multi-family development takes approximately 18-24 months, depending on the scale of the property and the number of units being built. The timeline starts the day we open escrow on the purchase. Then we follow the process of purchasing the property, 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 property.
Investor distributions are prorated based on the time you invest in a project.
Gatsby follows market trends closely and is always on the search for new deals to bring you the most lucrative investment opportunities possible. And since we always have new deals in the pipeline, we want to keep you in the loop on what projects are coming up. This way you have as much information as possible to make good investment decisions.
To that end, our investment opportunities follow three stages: