Multi-Family Development Information
Multi-family home developments are opportunistic real estate investments. Because of the substantial value we add by building from the ground up, Gatsby’s multi-family developments historically have some of our highest yielding returns. Gatsby purchases a property for the location (often a single-family lot with the right zoning for a multi-family), tear down any existing structure, and build the new multi-family property in its place.
To maximize returns and mitigate risk, we focus on apartment buildings with a comparatively low number of units (typically 4-10 units). Not only are these smaller projects faster to develop and build, but it’s also easier to get the required building permits. The shortened development timelines allow us to more accurately project returns. Just as importantly, smaller buildings are in higher demand. Renters appreciate the neighborly vibe of smaller communities, and when it’s time to sell the building, there will be more buyers in the market for a smaller development.
The benefits of investing in multi-family development
Potential for above-average yields.By building from the ground up, we have established a track record of better-than-normal returns.
Flexible options to create recurring income.Rather than cashing out when the development is complete, you can continue your investment into multi-family rentals, which allows you to benefit from passive rental income.
The power to choose your specific investment properties.Gatsby gives you deal-by-deal control. Rather than investing in a portfolio of unknown projects, you get to review the property details (including the address), financial breakdown, and development plan for each of our developments and choose the projects you’re most interested in.
Ownership of a piece of LA real estate.The LLC structure Gatsby uses allows investors to own a stake in the underlying real estate. This is very different from most real estate crowdfunding platforms, which only offer debt-equity rather than ownership.
The process of multi-family development investing
Our real estate experts analyze hundreds of properties before choosing one with the highest yield potential. Before initiating a purchase, we analyze the location, zoning code, lot size, buildable square footage, as well as the neighborhood’s market value, rental pricing, and occupancy rates. Our experts also estimate the building costs in comparison to the after-construction value to ensure a profitable result.
We negotiate to buy the chosen property under favorable terms. We strive to get the lowest price, so we have the greatest possible margin to work with and negotiate to get the best possible terms on our construction loan to minimize interest rates and loan fees.
In most cases, we tear down an existing structure and grade the lot for the new structure according to design plans by our team of architects. We consider the layout and design potential, along with value-add features like extra parking or rooftop decks.
With the lot prepared, our construction team can get to work building a modern multi-family building that will generate instant demand from renters and potential 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 and faster payouts for the investors.
The option to continue into a rental investment
Our multi-family development projects come with two different options. If you want to invest your money in the development phase and exit once it is complete, that is possible. But some of our properties also come with an option to continue into a long-term multi-family rental investment.
Our real estate analysts will review the rental income and appreciation potential of each development to determine if it should be held in our long-term portfolio. If it makes financial sense for the investors, we will offer the option for you to continue with the next phase of the property as we rent it to qualified tenants. This allows you to take advantage of tax benefits, property appreciation, and passive rental income.
Another benefit of continuing into a rental investment is that you can choose to reinvest your profits from the development (to compound your interest in the rental phase of the project) or to pull them out of the deal and continue only with the initial investment amount. Please note that your shares may be deluded based on the amount you invest in the rental phase of the deal.
If you decide to continue your investment from the development phase into the rental phase, you can lock in a five-year investment. Every five years, we will reevaluate the property and give investors the option to continue their investment for another five years.
See our multi-family rental page for more information on rentals.
The option to exit after the development phase
If you prefer a short-term investment and don’t want to continue into a long-term rental, you can exit the investment once the development phase is complete. New investors will then have the chance to purchase your shares based on the property’s new appraised value.
To bring you the most lucrative multi-family development investment opportunities, Gatsby follows market trends closely and is always on the search for new deals. We want to keep you in the loop on potential investments as we find them.
Our projects follow three investment stages:
- Coming soon. A sneak peek at the potential deals we’re lining up for the future.
- Pre-investment. A no-cost, no-obligation way to reserve your spot in an investment type until we have secured a property.
- Open investment. The project is open to investors. You can transfer your investment funds and confirm your ownership stake in the property right away.