Single-Family Rental Information
If you are looking to build a long-term real estate portfolio without the upfront expense of purchasing homes on your own, or the ongoing hassle of managing properties yourself, our single-family rental investments are a great fit for you.
With a small upfront investment, you can own a share of a single-family rental property in the desirable Los Angeles real estate market. This investment allows you to take advantage of tax benefits, collect passive rental income, and benefit from the property’s appreciation over time while Gatsby takes care of all the work for you.
The Los Angeles residential rental market shows consistent growth in both rental rates and property values, making this a lucrative investment option.
The benefits of investing in single-family rentals
Appreciation.Historically, single-family homes in Los Angeles have the highest appreciation rates over time.
Stability.Real estate is less volatile than the stock market and has historically outperformed the S&P 500.
Cash flow.Our single-family rentals start generating cash flow almost immediately. Monthly rental income covers property expenses, and any amount in excess of the expenses is distributed to investors as passive income.
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.The LLC structure Gatsby uses allows investors to own a stake in the underlying real estate. This is very different from most real estate crowdfunding platforms, which only offer debt-equity rather than ownership.
Choosing the right property
When choosing the right property for our single-family rentals, our real estate experts look at several key factors. First, the property needs to be purchased at the right price in order to have the best possible starting point. It also needs to be in a growing area for maximum appreciation. Although Los Angeles, as a whole, has enjoyed a great history of year-over-year appreciation, we focus on specific submarkets where the property has even better potential to grow in value over time.
We like to find “undiscovered” neighborhoods with high rates of owner-occupied homes that are just starting to become popular with renters. We look for areas with high rental demand from long-term renters, strong job opportunities, and close proximity to transportation links.
Our real estate professionals complete extensive due diligence before putting in an offer on a house. We focus on existing structures that are either brand-new, newly renovated, or require only light cosmetic work to get tenant-ready. And we always make sure that the property comes with an ADU (accessory dwelling unit), which will bring in a second stream of rental income.
Securing the property
When our offer has been accepted, our experts complete the final round of due diligence work to make sure the title to the property is clear and there are no hidden defects. Any potential defect or cloud on title may require a renegotiation of the purchase price or termination of the purchase contract.
When we have found a property with the best potential for all the things we are looking for, 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
Gatsby Investment takes care of the full rental process from start to finish. We negotiate financing options, secure the loan, complete tenant screenings, oversee the property management company, and handle the accounting services including quarterly investor distributions, 1065 tax filings, and Schedule K-1s.
This makes the investment completely passive to investors. You can track your investment and quarterly rental distributions from your online investor dashboard at any time, throughout the term of your investment.
The option to sell your share every five years
Our rental investments are meant to be long-term so that investors get the benefit of appreciation over time while collecting passive income from rental payments. Therefore, our goal is to not sell these properties. Instead, we offer investors the chance to build an income-generating real estate portfolio and increase their equity over time.
But, in order to offer flexibility to investors, we offer these opportunities in five-year increments. This gives you the option to exit the investment every five years by selling your share of the property. At the end of a five-year period, we will contact investors to notify you of your option to exit or to continue into another five-year rental period.
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 and allow the property to continue appreciating over time. You might also benefit from a potential cash-out refinance; every five years, we will consider a refi, depending on the interest rate and appreciation growth. With a cash-out refi, we can pull money out of the deal and return some of the original investments back to the investors.
The single-family rental 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 to purchase the property. We quickly find qualified renters to occupy the property. Then, when the property has been 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 appraise the property and calculate the 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: