Single-Family Build-to-Rent Information
Gatsby’s unique build-to-rent investment model combines a short-term house flip project with an ongoing rental investment to give you the benefits of both investment types in one!
By getting in at the ground floor of an investment, you can take advantage of the initial value-add from the renovation or development of a single-family home. Then, you can defer taxes on those gains by continuing into the rental holding. At that point, you get to enjoy passive cash flow from the rental income while also benefiting from the property’s appreciation over time.
This strategic model is designed to provide maximum returns for our investors. It is the perfect option for investors who are looking to build a long-term portfolio.
The benefits of investing in single-family build-to-rent
Unique investment model.With this model, you get all the benefits of both a short-term flip plus a long-term rental in one investment! Enjoy maximized return potential, tax benefits, passive cash flow, and property appreciation.
Building equity in the property!By starting with a property that needs work, we take advantage of the value-add phase and build equity in the property before moving into the rental holding.
Partial return of your initial investment.Every five years, Gatsby may refinance the loan based on current interest rates and property appreciation. If we refinance, we may choose a cash-out refi to pull equity from the initial investment and disburse funds back to the investors.
Long-term options for recurring income.If you’d like to keep your money invested to benefit from passive rental income , simply continue your investment every five years.
Choosing the right property
Gatsby is highly selective when it comes to choosing the right property for a single-family build-to-rent. We have a very specific set of criteria we follow when scouting deals. The property must have major transformation potential, and the lot must be large enough to build an Accessory Dwelling Unit (ADU), which allows us to create multiple income streams from the same property. The property also needs to be available at the right purchase price to give us a solid starting point to create the most favorable outcome for investors.
Starting with a renovation/development project offers multiple advantages over buying an existing rental property. First, we are in control over what we build and where. This allows us to meet market demand and optimize the property for rental purposes. Secondly, by starting with a property that needs work, we benefit from the value-add phase, building equity in the property before moving into the rental holding.
Our experts analyze hundreds of homes to find just one that meets our high standards. Finding strong investment properties has become more difficult in recent years, as large companies have started purchasing residential properties in bulk, often paying over market value. But through the industry connections that Gatsby has built over the years, we have an insider track to deals that individual investors would not have access to. Our investment property leads come from our relationships with hundreds of local real estate brokers and from nontraditional sources, including off-market properties, foreclosures, probate courts, and auctions.
Every property goes through an extensive due diligence process that is designed to mitigate any risk and ensure the most profitable returns possible.
Securing the property
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 any financing needed, complete all title and escrow documents, and successfully close the deal.
Renovating/developing the property
We work with award-winning architects, Landry Design Group, to create our custom designs. Each home is unique, so we look for ways to maximize the value-add, based on the individual property’s needs.
Once the design and building permits are approved, we get to work transforming the property. In most cases, we take the house down to the studs and make the home look brand new. We may change the layout of the home to make it more practical. And we often build an ADU (Accessory Dwelling Unit) to maximize the living space, create a second rental income stream, and increase the property value. We also change the landscaping and hardscaping to create a stunning before-and-after result that will attract well-qualified renters.
Gatsby manages the construction process from start to finish. We keep investors updated via the progress bar on your investor dashboard, and we send email updates when the project moves from one status to another. Our team also uploads photos throughout the process so investors can see the progress for themselves.
Thanks to our large construction team, we can utilize skilled workers across multiple areas of each development simultaneously and complete projects in remarkable time. And finally, because of the volume of projects we take on, we are in a position to negotiate discounts on labor and material cost, which gives our investors a better return on their investment.
Transitioning to a rental holding
Once the construction phase is complete, we fill each unit with creditworthy tenants, stabilize the property, then order a new appraisal to confirm the value we have added and refinance the loan.
During the rental phase, investors will see cash flow from rental income, as well as long-term appreciation.
This investment model is completely passive to investors. Our professional property managers will handle the day-to-day operations of the property. And Gatsby will provide quarterly distributions from rental income to investors throughout the rental phase.
See our single-family rental page for more information on rentals.
The option to sell your share every five years
Gatsby’s goal is to not sell the property. We want to hold it for the long term to allow investors to create a passive rental portfolio that grows their net worth year by year.
But we recognize that investors value flexibility and appreciate the periodic option to exit the investment. To that end, we have built exit periods into this offering. At the end of the initial six-year investment period, and then every five-year period afterward, you will have the option to exit the investment by selling your share in the property.
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.
If you choose to continue the investment for another five years, you will continue to benefit from quarterly disbursement and additional property appreciation over time. You would also be eligible for any distributions of initial investments from a potential cash-out refinance. Every five years, just prior to the exit period, we will review the interest rate and appreciation growth to determine if a refinance makes sense. With a cash-out refi, we may be able to return some of the original investment back to investors.
The single-family build-to-rent project is approximately a six-year investment.
The renovation/development phase of the property can range from 6-12 months. After that, we fill the home with tenants and stabilize the property. The rental hold period will be for five years, and you will receive quarterly distributions from any rental income throughout this period.
Investor distributions are prorated based on the time you invest in a project.
At the end of a five-year rental 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 if you want to exit the investment by selling your share or continue for another five years.
Gatsby follows market trends closely and is always on the search for new deals to bring you the most lucrative investment opportunities possible. And since we always have new deals in the pipeline, we want to keep you in the loop on what projects are coming up. This way you have as much information as possible to make good investment decisions.
To that end, our investment opportunities follow three stages: