Multi-Family Rental Information
Multi-family home rentals are an incredible investment vehicle for investors who want passive rental income plus the appreciation of the property over time. And if you don’t have the experience, time, or desire to manage a multi-family rental on your own, investing with Gatsby gives you access to our team of professionals who will manage all of this for you.
Gatsby pools capital from multiple investors, which allows you to invest with a low minimum amount. So you can own a share of a multi-million-dollar property in the elite Los Angeles real estate market without the burden of funding the project on your own.
You get to take advantage of all the benefits of multi-family rentals (including tax breaks, passive rental income, and property appreciation) without the high upfront costs or hassle of traditional multi-family rental investing.
The Los Angeles multi-family rental market experiences consistently high demand and comparatively low supply. This drives growth in both rental rates and property values, making LA multi-family a desirable investment option.
The benefits of investing in multi-family rentals
Stability.Real estate is less volatile than the stock market and has historically outperformed the S&P 500.
Cash flow.The monthly rents received from the renters cover property expenses and can provide passive income to investors.
Appreciation.Investors benefit from the growth of real estate values over time.
Tax advantages.Claim deductions on your income taxes for your real estate holdings. 100% of the property’s depreciation expense will pass through to the investors based on their respective ownership percentages.
Ownership of a piece of LA real estate.With Gatsby, you don’t just own debt-equity; you actually own a stake in the underlying real estate.
Choosing the right property
Our multi-family rental properties are existing developments that we purchase with the intention of generating cash flow for investors, as well as increasing in value over time. Existing properties often start generating income right away.
We look for multi-family properties in the 4-20 unit range. This could be a brand-new property or an older building that has the potential for us to add value through a light renovation to increase the rental rates.
We specifically target up-and-coming submarkets, centrally located in the LA area. We look for neighborhoods that are seeing strong rental increases and have solid amenities like entertainment, parks, and good schools. The property itself must be low maintenance and priced right.
Gatsby’s real estate experts use our industry connections to find qualified properties. And we complete an in-depth due diligence process to analyze many properties before making an offer on the properties with the greatest return potential.
Securing the property
When we have found a property that meets all of our criteria, 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.
The rental holding
Once the property is purchased, we complete any renovation needed, fill any vacant rental units, and stabilize the property.
Our experienced team handles every aspect of the process from start to finish. We negotiate financing options, secure the loan, advertise the property to qualified tenants, complete tenant screenings, oversee the property management company, and handle the accounting services including quarterly investor distributions, 1065 tax filings, and Schedule K-1s.
The option to sell your share every five years
The benefit of rental properties comes from holding them long-term and giving them time to appreciate in value while collecting passive income from rental payments. Therefore, our goal is not to sell our multi-family rental properties but to give investors the chance to build a passive real estate portfolio with growing equity over time.
In order to offer flexibility to investors, we offer these opportunities in five-year increments. At the end of a five-year period, we calculate the financials for the upcoming investment period and give investors the option to sell their shares in the property or to continue into another five-year investment.
If you choose to exit the investment, we will advertise your share for sale on the website, and new investors will have a chance to purchase your share based on the property’s new appraised value.
By continuing the investment, you keep your equity in the deal and will continue receiving quarterly disbursements while the property appreciates over time. Plus, every five years, depending on the interest rate and appreciation growth, we may get a cash-out refi on the property, which would allow investors who continue with the deal to receive some of their original investment back.
This is a five-year investment, with the option to exit or continue the investment every five years.
The timeline starts the day we open escrow for purchasing the property. Then it typically takes a couple of months to get the property stabilized. Once the property is stabilized, investors will receive quarterly disbursement from any rental income throughout the five-year hold period.
Investor distributions are prorated based on the time you invest in a project.
At the end of a five-year investment period, Gatsby 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 to either exit the investment by selling your share in the property or continue for another five-year rental holding.