Value-Add Multi-Family
Value-Add Multi-Family
Value-Add + Rental Hold
- Multi-family homes
- 3–5 years
- Tax benefits
- Fix and rent
Investing in Multi-Family Value-Adds
Our multi-family value-add investments are existing properties that we purchase with the intention of renovating and improving to maximize value. This allows investors to build equity in the property from the value-add phase, then generate cash flow from rental income while gaining additional equity over time through appreciation.
As an investor, you can take advantage of all the benefits of multi-family rentals, including passive rental income, tax breaks, and property appreciation, without the high upfront costs of doing it yourself.
Gatsby’s syndication structure enables you to invest with a low minimum investment amount, giving you a share of a multi-million-dollar property without the burden of funding the project alone. You can leverage the skill, knowledge, and connections of an experienced team of real estate experts who manage the project from start to finish.
The Benefits of Investing in Multi-Family Value-Adds
The Process of Multi-Family Value-Add Investing
Choosing the Right Property
Through years of experience in the industry, our team of experts has developed a proven system to maximize profits. This starts by finding properties with the greatest transformation potential. We use our industry connections to find qualified properties from sources like property auctions, probate courts, and pocket listings. We typically complete a detailed due diligence analysis of dozens of properties before making offers on a few properties with exceptional yield potential.
We search for properties in up-and-coming submarkets, which are centrally located, in neighborhoods that have solid amenities like entertainment, parks, job opportunities, and good schools, and that are seeing strong rental increases and property value growth.
We look for existing, well-priced multi-family properties, typically with 50 units or fewer, that have the potential for us to immediately add value by improving the overall look and feel of the property. We specifically target properties that have been mismanaged, have below-market rents, or are otherwise performing below the property’s potential. These properties provide opportunities to push rents higher.
If, for example, we find a qualified property that is only 70-80% occupied, we see this as an opportunity to immediately renovate the empty units, which we can fill with qualified renters at a higher rental rate. Similarly, if we find a property with 10-20% tenant turnover, we know that we will be able to renovate that percentage of the units as existing renters vacate the property. Providing higher-quality interiors will allow us to increase the rental rates, while also reducing turnover of the higher-value units.
Securing the Property
Once we find a property that meets all of our criteria, 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. Investors have a chance to join in the deal and claim an ownership stake in the property.
The Renovation
Once the property is purchased, we begin the renovation process. We can improve both the interior and exterior of the common areas of the building through new facades, upgraded landscaping, updating the lobby and hallways, adding new light fixtures to brighten up the space, etc. We also look for renovation potential in the individual units. We can replace cabinets, countertops, and flooring and upgrade fixtures to appeal to today’s renters.
The initial renovation can take 12-24 months. Additionally, we will continue to remodel units as tenants move out during the rental holding period. Any time an unrenovated unit is vacated, we will remodel that unit so that we can rent it to the next renter at a higher rental rate.
With the vacant units remodeled, we can begin filling those units at higher rental rates to stabilize the property.
The Rental Holding
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.
Timeframe
The estimated timeframe for a multi-family value-add investment is 3-5 years. This includes both the renovation phase and the rental hold period.
The timeline starts the day we open escrow for purchasing the property. Then it typically takes anywhere from 12-24 months to complete the renovation. Once the renovation is complete, and any vacant units are filled, we stabilize the property.
At that point, investors will typically start generating quarterly distributions from any rental income. Then, they will continue to generate rental income throughout the hold period.
Gatsby will watch for the right time to sell the property based on several factors, including general market conditions, interest rates, and buyer demand. But the rental period would typically be 2-3 years. Investors will be informed when we start the property appraisal process and put the property on the market for sale.
Once the property is sold and escrow closed, investors receive their distributions from the sale of the property within 10 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 the specific deal, including property address, financial breakdown, estimated timeframe, investment strategy, area comps, and photos of the property. There is also an ROI calculator feature available for each opportunity that states the minimum and maximum investment available. The calculator also allows you to enter an amount and view your estimated target share in the property and estimated 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 project is active, you can track your investment from start to finish through the user-friendly online dashboard. You’ll be able to see the project’s progress bar and progress photos of the new construction. We also send email updates when the project moves from one status to another.
You can also track your scheduled rental payouts under the “Account” tab in “Statements.”
When the property is 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!