Multi-Family Development Information
OPPORTUNISTIC - GROUND-UP CONSTRUCTION
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-million-dollar property without the financial burden of funding the development on your own.
Multi-family 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.The process of multi-family development investing
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 structure.
Our real estate experts analyze dozens of properties in growing markets 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.
Each property is purchased with a target buyer in mind. Depending on the location of the property and demand in the area, we may aim to sell the entire development to a single buyer, or we might sell the property to multiple buyers as a Tenants-in-Common (TIC) property or as individual condo units.
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 properties 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 the financing, 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 buyers and renters in growing metro markets.
The design, layout, and finishes we choose depend on the exit strategy of the property. Some properties are developed to be sold as a whole to one single buyer, while other properties are designed to be sold to multiple buyers as TICs or condos. We tailor each property to the eventual buyer.
For the properties that are designed as TIC and condo developments, we create units that feel like home; we want to appeal to individual buyers who are looking for a unit to call home for the long term. These buyers want higher quality, more privacy, and a homey feeling. So we target residential locations, preferably with a mix of single-family and multi-family residential, and we design high-end units to meet buyer expectations.
For multi-family developments sold to one buyer, we implement a completely different strategy, creating units that will appeal to the eventual renters. By developing units that will be in demand by renters, we create demand from individual investors who wish to buy the property as a rental investment. To tailor our developments to today’s renters, we build large units with multiple bedrooms of equal size, each with an ensuite bathroom. This layout is ideal for today’s “co-living” trend in which renters are living with multiple roommates to split the rent and make housing more affordable. Similarly, growing families who have been priced out of the housing market are looking for large apartments with enough space to accommodate multiple children plus a home office.
To make sure our buildings are 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.
Selling the property
When construction is complete, we prepare the property for sale. The marketing for each completed development will be handled differently depending on the target buyer.
Our typical sale preparation includes staging at least one unit, taking professional listing photos, listing the property on the MLS (multiple listing service), and actively advertising it to qualified buyers.
Timeframe
A multi-family development takes approximately 18-24 months, depending on the scale of the property, number of units being built, exit strategy, and location.The timeline starts the day we open escrow on the purchase. Then we follow the process of purchasing the property, designing and permitting, building, and advertising the property for sale. The timeline ends the day we close escrow on the sale of the whole property. When the property is sold, Gatsby sends the disbursements to investors within 30 business days.
The timeline starts the day we open escrow on the purchase. Then we follow the process of purchasing the property, designing and permitting, building, and advertising the property for sale. The timeline ends the day we close escrow on the sale of the whole property. When the property is sold, Gatsby sends the disbursements to investors within 30 business days.
Placing and tracking an investment
All investment opportunities are offered directly on the website under the tab “Invest” when clicking “View all investments.”
You can click on an investment project to view detailed information about each specific deal, such as property address, financial breakdown, estimated timeframe, investment strategy, area comps, and photos of the property. There is also an ROI calculator feature available on each opportunity that states the minimum and maximum investment available. It allows you to enter an investment amount, and calculate your estimated target share in the property, ROI, and projected return.
Placing an investment is easy! You will be guided step-by-step to finalize your investment request on the website. When your investment has been placed, you will be given the wire transfer and ACH instructions. You will then have five business days to send the funds and secure your place in the investment.
Once the investment is active, you can track your investment from start to finish through the user-friendly online dashboard where we display the project’s progress bar and upload progress photos of the renovation and new construction. We also send email updates when the project moves from one status to another.
When a project is completed and sold, you will receive your disbursements via wire transfer. After receiving the funds, you can enjoy your proceeds or look for new investment opportunities to continue to grow!