Multi-Family Value-Add TIC
Multi-Family Value-Add TIC
Renovation + TIC Conversion
- Property Type: Multi-family apartment building
- Timeframe: 12–18 months from start to finish
- Strategy: Renovate - Convert into TIC - Sell
- Payout: Lump sum payment after property sale
Investing in Multi-Family Value-Add TICs
Our multi-family value-add TIC (Tenancy-In-Common) investments are designed to maximize returns through strategic property renovations and individual unit sales. We acquire underperforming multi-family properties with significant potential for transformation, renovate them, convert them into TIC units, and then sell each unit separately.
Gatsby’s syndication model pools funds from multiple investors, enabling participation in a multi-million-dollar property with a low minimum investment. Our experienced real estate team manages every aspect of the project from start to finish. By leveraging the expertise, knowledge, and connections of our seasoned team, we ensure professional oversight and execution, making your returns completely passive.
The Benefits of Investing in Multi-Family TICs
Our TIC (Tenancy in Common) Strategy
A TIC is a form of co-ownership where each buyer owns an undivided share of the property, known as "tenants in common."
TICs are popular in high-cost markets like Los Angeles due to their affordability and accessibility. Given LA's expensive real estate, TICs offer a more realistic option for homeownership compared to single-family homes or condos.
We renovate TIC properties to meet the expectations of buyers seeking long-term homes, focusing on quality, privacy, and a homey feel with a tailored finishing package.
TICs not only benefit buyers but also yield substantial returns for investors, typically selling for 10-20% more than traditional rental properties.
Although a TIC (Tenancy in Common) sounds similar to a traditional condo, there is a significant difference in the ownership structure. When you purchase a condo, the deed specifies exactly which part of the property you own, creating a legal division of the property among individual owners.
In contrast, when you are part of a TIC, you own a percentage of the property along with the other buyers. This gives each owner an “undivided” interest in the property. All buyers enter a partnership, using a TIC Agreement to define the ownership structure as well as the rules and regulations. While TIC units look and feel just like condo units, buyers typically get more for their money by owning an undivided share rather than a designated unit.
Converting an apartment building into a TIC rather than a traditional condo is a much faster, cheaper, and more certain process. This approach also eliminates the need to upgrade the building to current codes or add guest parking spaces, which is often infeasible. Additionally, there is no 10-year warranty requirement, which significantly reduces risks.
TICs are cheaper to purchase than condos, attracting a larger pool of buyers for our properties. This contributes to creating affordable housing solutions. By converting to TICs, we can deliver homes more quickly and economically while maintaining a strong market appeal.
Another benefit of TICs versus condos is that the HOA fees are lower, which is more attractive to buyers. Additionally, there is more flexibility in the HOA rules and regulations, resulting in less red tape.
TIC is a relatively new concept in the Los Angeles area. However, places like San Francisco, with its high prices, tight geographic boundaries, and severe housing shortages, have been utilizing and marketing TIC properties since the late 1980s. As housing becomes more competitive in LA, more buyers and investors are showing interest in TICs.
Key Factors Driving TIC Demand:
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Affordability:
- Affordability is a significant issue in Los Angeles County, with nearly three in four residents unable to afford a median-priced home.
- Young professionals, in particular, burdened with student loan debt, often fear they may never achieve homeownership locally. TICs offer an affordable pathway to getting on the property ladder.
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Accessibility:
- TICs provide a financially realistic option for buyers, as purchasing a share of a TIC property is much more affordable than buying a single-family home or a condo.
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Market Adaptation:
- As housing competition increases in LA, the market is adapting to include TICs as a viable option for potential homeowners.
TIC properties appeal to a diverse range of potential buyers due to their affordability and accessible paths to homeownership, especially in desirable areas where traditional homes or condos may be out of reach. The typical TIC buyer profile includes:
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First-Time Buyers:
- Individuals or couples looking to purchase their first home in a desirable neighborhood without the high costs associated with traditional homeownership.
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Empty Nesters:
- Older adults looking to downsize from larger homes or suburban properties into a more manageable and affordable urban or central location.
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Maintenance-Averse Buyers:
- Buyers who prefer the reduced maintenance responsibilities offered by multi-unit buildings over the upkeep of single-family homes.
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Equity Sellers:
- Homeowners looking to capitalize on their home equity by selling their property and downsizing to a more affordable TIC unit in the same neighborhood or a similar desirable location.
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Renters Ready for Ownership:
- • Individuals or families currently renting who are eager to transition from paying rent to building equity in their own property.
The Process of a Multi-Family Value-Add TIC Investment
Choosing the Right Property
Through years of experience, our team of experts has developed a proven system to maximize profits. This starts by identifying properties with the greatest transformation potential, using our industry connections to find qualified opportunities.
Key Considerations for TIC Properties:
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Location:
- We choose neighborhoods and streets carefully, focusing on areas with a mix of single-family and multi-family properties to give the TIC a home-like feel.
- We target centrally located, up-and-coming submarkets with entertainment, parks, job opportunities, and good schools.
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Market Dynamics:
- We look for neighborhoods experiencing strong rental increases and property value growth.
- Walkability is crucial, so we prioritize locations with access to public transportation, dining, and other conveniences.
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Competitive Landscape:
- A good TIC area will have some nearby condo sales to inform pricing but not so many that competition becomes too stiff. We perform extensive due diligence to ensure the perfect balance of comparable units and potential for TIC development.
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Property Characteristics:
- We seek existing, well-priced multi-family properties, typically with 10 units or fewer, that allow 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 underperforming. These properties provide opportunities to secure favorable purchase prices while achieving successful sales.
The specific neighborhood, street, and lot chosen for this project have limited inventory and high demand for TICs, making it an ideal location.
Securing the Property
Once we identify 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 Phase
Our construction team is committed to enhancing both the interior and exterior of the building. We revitalize common areas with new facades, upgraded landscaping, and refreshed lobbies and hallways, complemented by modern light fixtures.
Each unit undergoes a thorough remodel, featuring new cabinets, countertops, flooring, and updated fixtures. We meticulously select materials and appliances that offer both quality and cost-effectiveness to ensure optimal returns. Every detail is executed with precision to achieve a stunning final result.
Thanks to our experienced professionals, skilled workers, and efficient systems, Gatsby delivers high-quality renovations within relatively short timeframes.
Interior Design
We work closely with our selected interior designer to create contemporary multi-family designs that embody upscale urban living. Each unit features high-quality appliances, vibrant color palettes, and premium finishes. In-unit washers and dryers enhance convenience, while private yard spaces offer residents the chance to enjoy Southern California's exceptional climate.
Property Sale
Months before project completion, we begin drafting key documents for the Tenancy in Common (TIC) arrangement. These include:
- TIC Agreement (TICA): Defines each owner's share and outlines co-owners' rules and responsibilities.
- TIC Budget: Details operating expenses (property taxes, insurance, management fees, etc.) and maintenance reserves for future upkeep.
We also prepare a Division of Space and Survey Map, which outlines the property's layout and common areas.
Upon receiving the Certificate of Occupancy (CofO), we take final property photos and list the units for sale. Our team markets and sells TIC properties in Los Angeles, targeting qualified buyers.
After all units are sold, we hold a Hand-Off Meeting to introduce new owners, review the TIC Agreement, budget, and survey map, and provide a Homeowner's Binder and Closing Package. This meeting marks the project's conclusion and ensures a smooth transition to communal living.
Timeframe
Our multi-family value-add TIC projects typically span 14-18 months from start to finish, beginning with the opening of escrow for the property purchase. The key phases include:
- Purchase Escrow
- Interior Design and Permitting
- Construction Phase
- Unit Sales and Selling Escrow
- Hand-Off Meeting with Residents
After the property sale and escrow closure, investors receive their distributions as a lump sum within 15 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, including the 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 project, which states the minimum and maximum investment available. You can enter an amount in this calculator to find 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 investment 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 as well as progress photos of the renovation and ADU 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!