Real Estate Investing News and Advice!

Welcome to your source for real estate investing news, insights, and guidance.

As industry experts, we stay up-to-date with real estate market trends, and actively work to stay ahead of changing market conditions. We’re excited to share our research and analysis with you! With these market insights, and real estate investing tips, you’ll have a competitive advantage over other investors in your local market.

The topics we cover include real estate news, interesting market trends, buying and selling real estate, and managing rental properties. We also share company news from Gatsby Investment, so you’ll have the inside track as Gatsby continues to expand operations.

Want to learn even more? Click the links to view educational articles, press releases, and explainer videos.

How Did Los Angeles’ Mansion Tax Affect Gatsby Investment?

Since April 1, 2023, the so-called mansion tax has been applied to every non-exempt real estate sale of $5 million or more in Los Angeles.

This initiative has raised around $439 million for city housing projects (as of October 31, 2024), but it has dramatically affected the local real estate market.

If you’re a Gatsby Investor (or you’re thinking about investing with us here at Gatsby), you may be wondering how LA’s mansion tax affected Gatsby. This post will explain how the mansion tax has affected our market, and what Gatsby is doing to help our investors make the most of today’s mansion-tax market.

What is the Mansion Tax?

The mansion tax, officially called Measure ULA, is an extra transfer tax on high-value real estate in the city of Los Angeles. This tax is charged to the sellers. However, sellers might increase the sales price in an effort to share the cost burden with the buyer.

When the voter-approved measure was launched on April 1, 2023, it applied to properties with a $5 million+ sales price, but this threshold is adjusted every year based on the Consumer Price Index.

Beginning June 30, 2024, the mansion tax is levied as follows:

Properties with a sales price below $5,150,000 = no additional tax
Properties with a sales price between $5,150,000 and $10,299,999 = 4% additional tax
Properties with a sales price of $10,300,000 or more = 5.5% additional tax

The while mansion-tax moniker makes it sound like this only applies to residential estates, it actually applies to all types of real estate: residential, commercial, industrial, and even vacant land.

Mansion Tax Exemptions

A property is exempt from the mansion tax if the transferee (buyer) is a qualified affordable housing organization, a qualified 501(c)(3) entity, or a government entity or agency.

Note: Even if the seller is a qualified affordable housing organization, it is not exempt from the tax if the buyer is not an exempt entity.

How is the Mansion Tax Affecting the Los Angeles Real Estate Market?

The long-term effects on property values and market dynamics are still unfolding, but so far, we’ve seen:

A rush of sales over $5 million just before the tax was implemented in Q1, 2023.
A slow-down in sales over $5 million since then, as the tax discourages property owners from selling.

Proponents of the measure claimed it would generate between $600 million and $1.1 billion per year to help the city fund housing initiatives. But so far, the actual income has been 27-60% short of expectations.

How Did the Mansion Tax Affect Gatsby Investment?

Prior to 2023, Gatsby had had success with luxury home developments. We would build one-of-a-kind estates in the most prestigious neighborhoods in LA, and sell to high-net-worth individuals with discriminating tastes.

The mansion tax dramatically slashed profit margins on this type of investment. Because we stay current on changing market conditions and real estate regulations, we were able to pivot out of luxury homes before the tax took effect.

Our goal is always to maximize the return potential for our investors. So we shifted to projects that offer better returns: single-family house flips and small multi-family developments.

Single-Family House Flips

Single-family house flips offer short terms, low minimum investment amounts, and impressive value-add potential. We focus on lots that are large enough to accommodate an ADU (accessory dwelling unit), which allows us to create two living units on a single-family lot.

Newly-renovated homes with ADUs are in extremely high demand because they are turn-key for the new buyer, and offer a separate residence to be used as a guest house, multi-generational living space, or even an income-generating rental property.

We specifically select mid-range properties that will sell below the mansion tax threshold, saving our investors from this profit-reducing tax.

Small Multi-Family Developments

Multi-family developments are in high demand and offer potential for above-average yields. We focus on lots that are large enough and zoned correctly to accommodate a 4-10-unit structure. These smaller multi-family buildings are easier to get permitted, faster to build, and in greater demand by investor-buyers.

These developments are built to sell and can be completed in as little as 18-24 months. By keeping the number of units low, we can keep the sales price below the mansion tax threshold to avoid the extra tax.

Invest with Gatsby Today!

Do you want to join the thousands of investors who have trusted Gatsby with their investment capital? Or maybe you’re ready to invest in your 2nd, 3rd, or 10th deal with Gatsby! Explore our available investment opportunities and leverage Gatsby’s local market expertise to grow your real estate portfolio!

Real Estate Investment Update: Why NOW is the Time to Invest in a Gatsby Deal

With the election behind us, some economic uncertainty has lifted, and we can now forecast more accurately for the remainder of 2024, going into 2025.

The real estate investment experts here at Gatsby have been analyzing changing market conditions in real time, and we have some insights on what you can expect in the year ahead. We also have some tips on how to strategically position your investment portfolio.

Take Advantage of Interest Rate Cuts and Positive Momentum

One of the most significant developments for real estate investors has been the recent interest rate cuts. Lower interest rates reduce borrowing costs and increase cash flow potential. This has a ripple effect throughout the market, leading to more buyers and prompting more sellers to make a move!

With inflation remaining a concern (despite its substantial slowing), there’s a strong possibility that rates may continue to decline, which would further support both our current and future investments.

Leverage Conservatively Structured Deals, Positioned for Success

At Gatsby, we are dedicated to providing attractive, sustainable returns to our investors. The projects we currently offer are conservatively underwritten, with timelines and return structures designed to withstand market shifts.

Since lower interest rates typically drive higher purchase prices, finding well-priced deals that make strong financial sense can be challenging. That’s why we’re especially proud of our current projects! They were acquired at favorable prices, and if rates continue to drop, these investments are well-positioned to exceed our projections upon completion.

Our conservative approach, combined with acquisitions made at favorable prices, allows our current projects to offer both stability and impressive return potential.

This is the Perfect Time to Diversify Your Portfolio

If you’ve been considering moving some of your investment capital into real estate, there may be no better time to act!

Stock markets are traditionally more volatile than real estate, which can expose stock-heavy portfolios to unnecessary risk.

Real estate remains a powerful tool for portfolio diversification, and Gatsby offers an ideal entry point for investors of all experience levels. Through our syndication model, funds are pooled from multiple investors. This allows you to start with a lower minimum investment while gaining access to exclusive development and value-add deals that would typically be out of reach for individual investors. You get to leverage funds from other investors and expertise from Gatsby to boost your returns! And since Gatsby handles every detail of the project for you, you get to skip the pitfalls and hassle of traditional real estate investments.

Plus, our platform provides complete transparency. You gain an equity share in each deal you choose, and you can track every step of your investment’s journey right from your account, no matter where you are.

Explore Opportunities with Us

There’s no better time to put your money to work. Learn more about Gatsby and how our real estate syndication platform can help you achieve your financial goals. Then explore our available investment projects and choose the project(s) that best suit your objectives.

Don’t wait - this is the time to take the next step toward building a more diversified, lucrative portfolio with shorter-term real estate investments!

How to Negotiate Your Fees as a Buyer’s Agent Post-NAR Settlement

The 2024 NAR settlement completely upended the way buyer’s agents are paid. For nearly a century, buyer’s agents were paid a percentage of the listing agent’s commission (typically 50%). Buyers didn’t have to pay their own agent out of pocket because, as we all know, buyers already have a major financial hurdle to overcome between the down payment, closing costs, moving expenses, and possible renovation costs.

Post-settlement, buyer’s agents aren’t given a share of the listing agent’s commission. Instead, you have to negotiate your fees with your buyers. And this post will give you some tips on how to negotiate effectively.

How to Negotiate Your Buyer’s Agent Compensation

1. Understand the Settlement Terms

Technically, the NAR settlement terms only apply to the REALTORS represented in the settlement. But, in practice, all licensed agents and brokers will feel the impact because local MLSs have changed their systems to accommodate the changes.

So you need to understand the terms of the settlement to make sure you’re operating ethically and legally.

The basics:

Sellers can’t pay the buyer’s agent directly or through their listing agent, but they can give the buyers a concession, which can be used to cover their agent’s fees.

Listing agents can’t publish a buyer’s agent commission split on the MLS, but they can promote the seller’s willingness to offer a concession on other sources, like their websites.

Buyer’s agents must negotiate a specific fee amount with their buyers (like a flat fee or a percentage of the purchase price). This must be documented in the Representation Agreement and signed by both parties before showings can begin. The buyer’s agent cannot earn more than this amount from this buyer, even if the seller is willing to offer a higher concession.

2. Demonstrate Value

Since you have to negotiate your fee with buyers, you have to show them what you bring to the table and why you’re worth the big bucks! Here’s how:

Highlight your differentiator. Clearly articulate what makes you a better choice than every other agent in the market. This might include your experience, local market knowledge, negotiation skills, or services.

Share success stories. Have your previous clients write or record a testimonial explaining how you helped them save money, get an offer accepted, or navigate a complex deal.

Find unique properties - before they hit the market. With Gatsby Investment, real estate agents can view active and pre-market listings. Our projects are either recently renovated or newly constructed and move-in ready. Even better, we have small multi-family developments available for your investor clients! Our 4-6 unit multi-family buildings are ideal for your investors who want to grow their portfolios without adding more units than they can financially or operationally support.

Provide real value before representing your clients. Stand out by giving value to future clients long before you sign them. You can send housing market reports to locals, host free first-time buyer seminars for renters, or provide complimentary property tax reviews for homeowners (which also gives you a chance to create a separate stream of income through property tax appeals!).

3. Offer Flexible Commission Structures

We’re all in favor of charging what you’re worth. If you’re an experienced agent worth 2.5%-3% of the purchase price, command that rate!

But this compensation structure change gives newer agents a unique opportunity to compete on price. Consider offering flat fees or variable rates (like a tiered commission structure based on the sale price or the level of service provided). You could even offer payment plans if you wanted!

Offering lower fees than your competitors means leaving money on the table for your first few deals. But it also gives you a chance to get those critical first deals under your belt.

4. Be Transparent

Provide a clear breakdown of your fees and what they cover. Educate your buyers on how you will be working to justify the fee. Set reasonable expectations upfront. Then exceed them.

Be honest about the seller’s potential role in covering your fees. Let your buyers know that they can request a concession to cover your fees when they write an offer to purchase a house. But also let them know that the seller does not have to grant the request. And, of course, sellers may prefer offers without a concession request. Perhaps your seller should offer a higher price in exchange for the concession. After all, that extra amount spread over a 30-year mortgage may be nominal.

5. Script Your Buyer Presentation and Rehearse

You’re probably familiar with scripting. You likely have a listing presentation script as well as scripted responses to common buyer and seller objections. Negotiating your commission requires the same forethought.

Prepare and rehearse your buyer’s presentation until it feels natural and spontaneous. As you do so, keep the following in mind:

Use data to support your compensation. Gather MLS data on the percentage of buyers who use an agent and (if possible) their outcomes compared to those without representation.

Get ahead of common objections. Be prepared to address questions like Why do I have to pay for your services when I can find a home myself? and Will you take a lower fee? Work those into your presentation to show that you understand the buyer’s POV.

Practice insightful questioning and active listening. If a buyer balks at your fees, listen for their real concern. Are they really afraid you’re not worth the rate? Or are they just concerned that they don’t have the money to pay you?

Gain a Repeat Buyer Client with Gatsby Investment

Gatsby Investment is always interested in partnering with Los Angeles-based real estate agents and brokers to find our next property.

We’re currently looking for vacant lots, distressed homes, and distressed multi-family buildings. Please review our specific criteria and submit potential properties for our consideration.

We’d love to be your next buyer client. And, because we regularly buy and sell properties, we could provide you with repeat business if you find us the right deals!

How Gatsby Selects Properties for Syndication

Gatsby Investment is highly selective about the properties we choose as syndication investment opportunities for our investors. We may review several dozen properties to find a single property with strong enough potential to become a Gatsby Property.

Are you wondering how we choose one property over dozens of others? Here’s a behind-the-scenes look at how Gatsby selects properties for syndication.

Step 1: Market Analysis

While we don’t try to time the market, we do leverage market conditions to make the most of our investments. So before we start looking at properties, we conduct a thorough market analysis, looking at factors like:

Economic indicators. Employment growth, interest rates, and consumer spending can all provide clues as to how much people will be willing to spend on housing and investment properties.

Local demographics. We look at population growth, household sizes and types, and age distributions to determine how wide the potential renter/buyer pool will be.

Market trends. Identifying trends in vacancy rates, rental rates, and property appreciation rates helps us understand demand for different property types.

Risk and return: We consider the risk and return profiles of different property types given current (and forecasted) market conditions. For example, house flips can be completed quickly and sold easily, but multi-family developments may offer better returns despite the longer hold period.

Step 2: Review of Property Features

Once we have selected a neighborhood based on our market analysis, we can narrow our search to specific properties that meet our criteria. Here are some examples of what we’re looking for:

Accessibility. Our properties need to have proper infrastructure and easy accessibility to public transportation or main thoroughfares so it’s easy for residents to get wherever they need to go from the property.
Zoning. We commonly convert single-family lots into multi-family housing to maximize returns and help ease the housing crisis. We need to make sure the zoning allows us to build what we want.
Lot size, shape, and grading. We often look for lots that are large enough to either add an ADU (accessory dwelling unit) to the primary structure or to build a multi-family structure from the ground up. We need to confirm that the size, shape, and grading can accommodate our proposed buildings.
Building restrictions. We need to know if there are limits to the properly zoned structure we can build on the property. For example, we may need to make sure the property sits a certain distance from the road or neighboring structures.

Step 3: Transformation Potential

To have transformational potential, we need to know we can get a good deal on a quality property that we can convert into a property that will rent or sell well.

For flips, we’re looking for a structure with “good bones” that we can quickly and efficiently add value to. For new developments, we need to consider the logistics of constructing a building in that location, given the constraints of everything from the lot’s current condition to street access for our construction crew.

In either case, we also need to consider which permits will be required and how long they will likely take to obtain.

We often choose properties that can be purchased for under $1 million, knowing that this leaves the potential for high profit margins. When constructing a new development, we focus on smaller buildings with 4-10 units. These structures have fewer permit restrictions, require less time to build, and appeal to a wider range of buyers than larger buildings.

Step 4: Financial Analysis

We’re always looking to optimize returns for our investors. Just as importantly, we want our projected returns to be as accurate as possible for our investors.

So we carefully conduct a financial analysis for any property we’re seriously considering. This means projecting total costs, estimating the ARV (after-repair value), and calculating a realistic ROI for the project. We publish our figures on our website so you can review the financials before deciding to invest in a specific project.

Step 5: Due Diligence

If a property ticks all our boxes to this point, it’s time to drill into the details with a thorough due diligence check. This includes:

Inspection. If we plan to keep the existing structure, we have a licensed inspector assess the physical condition of the property to alert us about any potential problems.
Survey. We confirm the geographical boundaries of the lot, including any easements.
Title research. We ensure that the current owner has the legal right to sell and that there are no encumbrances or property disputes to worry about.
Environmental checks. Depending on the area, we may conduct an environmental assessment to avoid any unforeseen liabilities from issues like soil contamination or flood risks.

We only proceed with a project once we have confirmed that every aspect of the deal aligns with our strict criteria and goals.

Invest in a Pre-Vetted Deal with Gatsby Today!

You can invest with confidence knowing that we carefully vet each property based on our strict selection criteria.

Explore our open investment opportunities and leverage the expertise of Gatsby Investment to maximize your return potential while minimizing your risk.

Why Affordable Homes are a Better Investment than Luxury Homes in Los Angeles

Luxury homes may be sexier than modest homes, but data shows that they typically aren’t the better investment. Data shows that affordable homes typically outperform luxury homes as investments.

This phenomenon is worth a closer look. So let’s figure out why affordable homes are generally a better investment than luxury homes.

One quick note before we begin: There is some debate about what constitutes affordable and what constitutes luxury. For the sake of this article, anything under the median home price in LA ($1,005,000 as of August 2024) is considered affordable, while anything over $5 million is considered luxury.

Affordable Homes Have a Wider Pool of Buyers

Because affordable homes are accessible to households with less income, there is a larger buyer pool for lower-end properties.

According to 2023 census data, 40.8% of LA households earn $100K or more annually. Assuming a 20% down payment, these households could afford a home with a purchase price of up to around $625,000. Luckily, many buyers are selling their current homes, giving them a larger down payment and allowing them to purchase properties around the $1 million median.

Only 16% of households in Los Angeles make upwards of $200,000 per year, making it much more difficult to find buyers who can afford a house priced at over $1 million.

There are no tracked statistics on how many people in Los Angeles make enough money to afford a luxury property, but it is a safe assumption that the number is far below 16% of households.

Affordable Homes Appreciate Faster

Because there is more demand for modest homes, they appreciate faster than luxury properties.

The median price for luxury properties (as defined in this Douglas Elliman study as the top 10% of the market) actually decreased by 10.5% in Q1 2024 compared to Q1 2023. During the same period, the median home price in LA increased by 13%!

Affordable Homes Sell Faster

With a larger buyer pool and greater demand, affordable homes sell faster than luxury properties.

While the time it takes to sell a property varies significantly by location, market conditions, and property specs, it generally takes luxury homes around 96 to 147 days to sell. For comparison, the median number of days spent on the market in LA is 47.

The ROI Can Be Better on Affordable Homes

Greater demand can drive up prices. And faster sales can save you money on holding costs. Both of these factors can mean a better ROI (return on investment) on affordable homes than luxury properties.

But there’s another big reason lower-priced homes provide better returns: the Mansion Tax.

In April 2023, the so-called Mansion Tax went into effect in Los Angeles. Formally known as Measure ULA, this initiative levies a 4% charge on all property sales above $5 million and a 5.5% charge on sales above $10 million. So if you sell a $6 million home in LA, you’ll pay $240,000 in extra expenses. Naturally, this severely cuts into your profits from the sale.

How to Invest in Affordable Homes in LA Without the Hassle

The potential downside of choosing affordable homes over luxury homes is that you have to complete a higher volume of deals to earn the same amount of money as you could on fewer luxury deals. And you might not have the time or patience to handle that yourself.

That’s where Gatsby Investment comes in!

We make affordable residential real estate investments accessible to investors who prefer passive returns to hands-on involvement.

Traditionally, investors only pooled funds for high-value commercial deals like office buildings and large apartment complexes. If you wanted to invest in a smaller deal, you had to fund and manage the entire project yourself (perhaps with the help of a mortgage lender and/or property manager, but you would have been the owner, solely liable for the project’s success).

With Gatsby, you can buy into a real estate syndication deal for as little as $25K, and have the entire project professionally managed by our real estate experts.

Take advantage of affordable real estate trends without the hassle. Invest with Gatsby today!

What the Fed’s Interest Rate Cut Means for Real Estate Investors

For the first time since March 2020, the Federal Reserve has cut interest rates. And not just by the quarter-point analysts were expecting, but by a more substantial half-point. This could be the catalyst for the market shift many real estate investors have been waiting for.

Here’s what the recent rate cut means for the real estate market in general and for you, as an investor, in particular.

What This Means for the Real Estate Market

Lenders rely on the Fed’s interest rates to set mortgage rates for real estate financing. When federal rates fall, mortgage interest rates do too. In fact, we’ve seen lenders reducing rates lately just because they expected the Fed to cut rates.

Lower interest rates mean it costs less to borrow money. And this has a ripple effect that extends throughout the financial markets and housing sector.

Lower interest rates give buyers more purchasing power. They can afford a higher purchase price, knowing that less of their mortgage payment will go toward interest. So buyer demand increases. Increasing demand can lead to higher property values and more market transactions.

Just as importantly, more property owners may be willing to sell now that interest rates are lower. Not only because prices could increase, but also because they know they can use their proceeds for a down payment on a replacement asset with a reasonable interest rate.

For a deeper dive on this topic, check out The Impact of Interest Rates on Real Estate Investing.

What This Means for Our Investors

Investors are excited about the Fed’s rate cut for two key reasons:

New acquisition opportunities. With the lower cost of borrowing, your investment dollars go further. And, as we see more sellers enter the space, you’ll have more inventory to choose from.
Stronger exit strategies. Increased buyer demand makes it easier to achieve quick property sales at favorable prices.

How Gatsby is Staying Ahead in a Changing Market

At Gatsby Investment, we believe this rate cut is a positive development for both the real estate market and our investors.

We remain committed to capitalizing on evolving market conditions while staying vigilant in managing risks. While we always underwrite deals based on current market conditions, the recent rate cut could create more favorable circumstances for our projects.

With this in mind, we are optimistic that our investments can exceed initial performance expectations, and we’re excited about the potential benefits this could bring to our investors!

If you’re ready to take advantage of our changing real estate market, explore the investment opportunities available through Gatsby and get started today!

How Interest Rates Impact Real Estate Investments

Changing interest rates impact real estate investments in multiple ways. Not only do interest rates affect your return on investment, but they also cause larger market shifts.

Here’s a quick look at:

How interest rates affect your investments,
Current rate trends, and
Smart strategies for dealing with higher inflation than we’re used to.

Looking for a deep dive into interest rates, check out our detailed article on interest rates and real estate investing.

How Do Interest Rates Affect Real Estate Investments?

Interest rates affect real estate investments in three key ways:

1. The Cost of Financing

Higher interest rates increase the cost of financing, making mortgages and other loans more expensive. This increased cost typically dampens buyer demand. And this means less buyer competition and greater negotiating power for the buyers who remain in the market.

Lower interest rates decrease the cost of financing. This encourages more buyers and investors to enter the market, often leading to increased demand and more buyer competition.

2. Property Values

Property values are generally inversely related to interest rates. When rates rise and demand decreases, property values tend to stabilize or decline. This can be a good opportunity for investors to buy properties for less than they would be worth under low interest rates.

Conversely, low interest rates can boost property values by incentivizing more buyers to purchase homes while the cost of borrowing is low.

3. Rental Yields

High interest rates may lead to higher rental yields. This is because fewer people can afford to buy homes when rates are high, so more people are looking to rent. Investing in rental property can be particularly lucrative during periods of high interest.

When rates are low, we typically see the opposite. Increased home buying reduces rental demand, which can soften rental yields. Of course, with lower interest rates, investors don’t need to charge as much in rent to cover their holding expenses.

What Are Interest Rates Doing Now?

Mortgage interest rates in the US have been trending downward recently. As of mid-September 2024, the average ratefor a 30-year fixed-rate mortgage is around 6.2%. This is down from a high of 7.8% in October 2023 and 7.2% in May of this year.

These declines are thanks to lower rates of inflation and expectations that the Federal Reserve will reduce short-term interest rates. If the Fed decides to cut rates further, mortgage rates could continue to decrease into 2025.

Today’s rates are high compared to the historic lows of the long recovery period from the housing market collapse of 2008. But our analysis of interest rates over time shows that today’s rates are still lower than average. Let’s not forget about those double-digit rates of the 1980s!

Steal Our Strategy: How Gatsby Manages Higher Interest Rates

Want to know how to manage higher interest rates? Here’s how the professionals at Gatsby do it.

Purchase at a Discounted Price

Knowing that our interest expense will be higher when interest rates are up, we pad our margins. Purchasing properties at below-market values allows us to reduce our overall expenses so we can maintain strong returns.

And how do we get properties below market value? Well, we have a few strategies. First, we find unconventional off-market deals. Since these properties are not listed on the open market, there is less competition, so we have greater negotiating power. We often focus on distressed properties with highly motivated sellers who are willing to let the property go for less than it’s worth. We also rely on our network of real estate brokers and agents to alert us to potential below-market deals.

Add Value

When interest rates are high, expensive turn-key rentals are less appealing. Instead, we often buy properties we can add value to and sell quickly to recover our investment. This reduces our long-term interest expense.

Single-family home flips and multi-family developments are both strong options for adding value and getting fast returns.

Watch for Future Opportunities to Refinance

While we always factor interest rates into our vetting process, we don’t want to pass up a great opportunity just because rates are higher than normal, especially if the higher rates have resulted in lower prices! So we take advantage of these opportunities as they come and continuously track interest rates so we can refinance when rates dip.

Build Your Real Estate Portfolio with Gatsby

If you want to build a real estate portfolio that makes smart use of interest rate changes, invest with Gatsby!

Our pre-vetted deals are available to all accredited investors (even if you live outside of California or even outside of the US). You get to leverage our industry expertise to make the most of your real estate investments. And because we handle every detail of every deal for you, you get to enjoy the benefits of real estate investing without the hassle, time commitment, or high upfront cost of traditional real estate investments.

Don’t let higher interest rates prevent you from building a profitable real estate portfolio! Explore our unique real estate opportunities and place your investment today!

Understanding Real Estate Market Cycles

As a real estate investment firm, Gatsby Investment uses real estate market cycles to inform our decisions and strategies. It’s not that we’re trying to time the market; it’s just that we understand certain real estate projects perform better during certain phases of the real estate cycle.

Here’s a peek behind the curtain at our real estate investing strategy based on market cycles.

What are Real Estate Market Cycles?

Real estate market cycles are the never-ending circle of distinct phases that we see play out in the market over the long term. There are four phases that continuously repeat:

Expansion. Steady growth in demand and values.
Hyper Supply. A total misnomer, hyper supply is when demand far outweighs supply. This is what we typically think of as a seller’s market.
Recession. Demand drops, leading to a slow market, and possible dips in property values. This is the typical buyer’s market.
Recovery. Demand and prices slowly rebound to pre-recession levels.

Real estate cycles are ruled by supply and demand, which can be influenced by factors like:

Interest rates.
New construction.
General economic conditions.
Population shifts.
Government incentives.

Interestingly, different cities can be in different phases of a cycle. For example, during the peak of the pandemic-fueled housing boom, many smaller markets were still in the hyper supply phase while large cities entered the recession phase. And now, while much of the country is slowing into a recession phase Los Angeles and San Diego are both among the top 10 hottest markets to watch this year.

It’s also worth noting that different property types can also be in different phases, even in the same market! For example, the rental market might enter recession earlier as renters become homeowners, but then it moves into recovery faster as would-be homeowners get priced out of the housing market.

For a deep dive into the real estate cycle, check out The Investor’s Guide to the Real Estate Cycle.

Gatsby’s Strategy for Each Phase of the Real Estate Cycle

Gatsby Investment is focused on low-risk investments with the potential to perform well in every phase of the real estate cycle.

For example, multi-family developments are a sound investment as long as there is enough renter demand to warrant building new rental units. Additionally, build-to-rent (BTR) projects work well in any market that has renters who want living spaces that feel more like a home than an apartment.

Having said that, we also want to capitalize on market shifts, so you’ll often see us take on special projects during different phases of the real estate cycle. Here are some examples:

During the expansion phase, we might add local California vacation rentals to the mix. Vacation rentals work well in expanding markets when people have the financial stability to travel and enjoy a week or more away from work.

During the hyper supply phase, we might increase our house flips, especially if we can add more value with an ADU (accessory dwelling unit) addition. This lets us use the market’s momentum to increase the value of the property by even more than the improvements.

During the recession phase, we might explore more affordable housing options, such as Section 8 subsidized housing. These units are in exceptionally high demand in recessed markets when more people qualify for this program with its strict income limits.

During the recovery phase, we might consider more distressed properties. Following a recession, there are often more properties with deferred maintenance issues or financial trouble, which gives us more leverage to negotiate a below-market purchase price.

Build Your Portfolio with Gatsby

Are you looking to build a real estate portfolio that performs well throughout each phase of a real estate market cycle? Take advantage of Gatsby’s strategy by investing with us!

Our pre-vetted deals are open to all accredited investors, even those who live out of state or out of the country. You can buy into our expertly-analyzed projects with low investment minimums, and leverage our industry experience to maximize your return potential while minimizing any risk.

We’re excited to serve you through every phase of the real estate market cycle!

What Does Gatsby Do for Investors?

At Gatsby Investment, we pride ourselves on delivering comprehensive real estate investment services to make the most of your real estate syndication portfolio. Our team of highly specialized experts is dedicated to maximizing the return potential on your investments while keeping the process stress-free for you.

Here’s how we support you every step of the way:

Market Research and Property Scouting. We stay on top of changing market conditions and continually search for locations that provide lucrative investment opportunities. Our network of local professionals often helps us find unique properties and off-market deals.

Evaluation of Potential Deals. Our experts meticulously analyze potential real estate deals, performing due diligence to assess risks and estimate returns effectively. Then we bring you the deals with the greatest opportunity for strong returns. For every deal we present to our investors, we have analyzed a dozen deals or more.

LLC Formation. We open a new LLC to serve as the ownership entity for each project we manage. We ensure that all investors in the deal are listed as members in the LLC with Class A units, providing a stable legal ownership structure that grants each investor an equity stake in the underlying real estate.

Property Acquisition. From negotiating purchase agreements to closing escrow, we handle the entire property acquisition process on your behalf.

Financing. Using our industry connections, we secure any necessary loans under favorable terms to optimize your investment capital. We regularly review any long-term holdings to determine if it makes sense to refinance the property so we can pull cash out to get capital back to investors faster than expected.

Architectural Design and Permitting. Our team works with award-winning architects to design spaces that appeal to a wide range of renters and/or buyers and increase the property value. We work with the city to secure necessary permits for a smooth construction phase.

Construction Management. We oversee contractors and builders, supervising renovations or new developments to make sure the work is of high quality. Despite the many challenges of construction, we do our best to keep projects on time and on budget.

Property Stabilization and Management. For long-term rentals, we find qualified tenants to fill all vacant units, optimizing rental rates to boost the property’s value.

Consistent Investor Communication. We provide regular updates on each project to keep you informed throughout the process.

Exceptional Customer Service. Our dedicated customer service professionals are available to promptly answer any questions and address any concerns so you can invest with confidence.

Marketing and Sales. When it’s time to sell the property, we develop a strategic marketing plan to attract qualified buyers at an optimal price point. We evaluate incoming offers, negotiate favorable terms, and navigate the sales process efficiently.

Financial Management. Our team handles all financial aspects of each project, including accounting and Schedule K-1 filing, to ensure transparency and compliance with applicable regulations.

Prompt Proceed Disbursements. We promptly distribute proceeds to investors, ensuring you receive your returns quickly.

At Gatsby Investment, it is our pleasure to take care of the entire real estate investment process from start to finish for our investors. Whether you’re looking for a long-term rental or a quick house flip, our services allow you to maximize your ROI without investing your own time or energy in the project. You can relax, knowing that your investment is in capable hands!

Ready to take advantage of the many benefits of real estate investing? Learn more about achieving your investment goals with Gatsby Investment or contact us directly at 866.428.7291 (866-GATSBY1) for a free consultation.

Why Now is the Perfect Time to Invest in Real Estate with Gatsby Investment

As we navigate through a dynamic and ever-changing real estate market, it’s essential to recognize that every phase presents unique opportunities for savvy investors. While it’s true that real estate has faced some challenges in recent years, these very challenges create prime opportunities for investors.

At Gatsby, we pride ourselves on our ability to adjust to market changes and remain well-positioned in the current market with a strong focus on what's in demand.

Here’s why now is an excellent time to invest in real estate through our syndication platform:

1. Buying Low in a Buyer’s Market

Real estate markets are cyclical, and we are currently experiencing a period where property prices have stabilized or even decreased in certain areas. This "buy low" phase is crucial for investors looking to maximize returns. When property values are lower, we can secure high-quality assets at a fraction of their future potential value. This sets the stage for significant appreciation and sale value as the market rebounds.

2. Diversification and Risk Mitigation

Investing through a syndication platform offers diversification that individual investments may lack. By pooling resources with other investors, you can invest in properties with a lower minimum amount and build a diversified portfolio of properties. This spreads risk across multiple assets and locations, reducing exposure to any single investment.

3. Inflation Hedge

Real estate has historically been an effective hedge against inflation. As prices for goods and services increase, so do property values and rental rates. This means that real estate investments can provide a safeguard against the eroding purchasing power of your money. By investing now, you position yourself to benefit from this inflation protection, ensuring your investment retains its value over time.

4. Consistent Demand in Los Angeles

Every city can be in a different stage of the real estate cycle. Los Angeles is currently experiencing a shortage of homes and a significant need for particular housing types. This consistent demand and growth make LA a resilient real estate market. Gatsby Investment has a specific focus and extensive market knowledge in Los Angeles, ensuring we can navigate and capitalize on this dynamic market. Our expertise allows us to identify high-demand properties and secure strong returns for our investors.

5. Strategic Property Development

The demand for rental properties remains robust, especially in high-demand markets like Los Angeles. With rising housing prices and changing lifestyles, more people are opting to rent rather than buy. Gatsby focuses on strategic property development, creating multi-family properties with large, more affordable units that cater to the needs of today’s shared-living renters. Our developments are designed to meet the growing demand for rental properties, ensuring strong and stable returns for our investors.

6. Utilize Our Relationships and Connections

Gatsby has established a strong reputation in the industry and is a market-leading company in Los Angeles. This allows us to access off-market deals, set favorable prices, and negotiate terms that individual investors might not achieve alone. We benefit from volume discounts on deals, labor, and materials. Additionally, our longstanding relationships with lenders enable us to secure favorable interest rates.

7. Technology-Driven Platform

Gatsby uses proprietary software to allow investors to access unique investment deals, stay organized throughout the process with regular updates, streamline operations, and manage projects in volume. This automation lowers overhead costs and leads to faster completion, ultimately generating higher returns for investors.

Discover Investment Opportunities with Gatsby!

At Gatsby, we believe in the value of investing across all market phases, recognizing the opportunities each phase presents. There is potential in every market as long as you know how to buy and what strategies to use. Ultimately, consistent investing is essential for growth and protecting your money from inflation.

By investing now through Gatsby’s syndication platform, you can capitalize on low property prices, benefit from diversification, hedge against inflation, and leverage our expertise to maximize your investment potential.

Join us and take advantage of the unique opportunities today’s market presents. If you have any questions or need further information, please don’t hesitate to contact our investment team. We are here to help you navigate and succeed in your real estate investment journey.

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Gatsby Investment’s Performance

Since the start of the company in 2016, Gatsby has acquired over 80 deals. As of October 1, 2024, 55 of those offerings have been completed. This makes Gatsby Investment the leading real estate syndication company in Los Angeles. View completed deals.

Trusted Members

16k+

Average annualized net return from 2017–2023

23%

Acquired Deals