Housing inventory hit historic lows in recent months while rising interest rates have made many owners hesitant to sell and give up their comparatively low-interest rate mortgages. This environment has meant that the need for new development is increasing, but securing the capital for new projects – either through investors or lenders – is getting tricky for developers.
That’s why Gatsby Investment, a leading real estate syndication company based in Los Angeles, launched sponsor partnerships. The recent addition to their website is a way for Gatsby to gain a foothold in other markets outside of LA while offering developers a convenient way to partner up with an established investment firm to do more projects.
How Gatsby’s Sponsor Partnerships Work
Through sponsor partnerships, Gatsby offers developers access to a pool of over 10,000 investors and the support of Gatsby’s team to handle the project and investors from start to finish. That way, developers can focus solely on the part of the work that they’re best at: building properties.
This is meant to be a much more streamlined, efficient and convenient alternative to the way capital is usually raised. Traditionally, a developer looking to fund a new project would need to go to friends, family, and others in their personal network to raise capital. It’s an often slow process that’s limited to the circle of potential investors that the developer already knows.
Even after they secure the capital, this process usually places the bulk of the administrative work on their shoulders. So they’re juggling project management on a new build while also fielding investor questions, drawing up tax documentation, and handling other admin tasks on the side. It can get tedious, time-consuming, and expensive to manage all of this – all while trying to make sure the project stays on track to meet its targets.
With Gatsby, proprietary software can automate a lot of that tedious work and make managing the project much easier. Meanwhile, the partnership takes a lot of that admin work off the developer’s plate as Gatsby’s team handles some of these logistics throughout the process.
To start, Gatsby sets up an LLC to serve as a stable legal structure for the property’s ownership during the project. All equity investors are named as members while Gatsby handles the escrow, legal contracts, and other logistics of securing the property on behalf of the LLC. Next, Gatsby secures financing through its established lender connections. The team will also handle loan draws and payments for expenses along the way.
Then, Gatsby promotes the new project on its online platform to get it funded as soon as possible. On the platform, investors can review the project details, have any questions answered by Gatsby representatives, and place their investments.
Once fully funded, the investment firm continues to handle all the financials and investor management throughout construction so that developers can focus all of their energy on making the project as successful as possible.
When the project is complete, Gatsby will oversee leasing and ongoing property management if it’s a long-term rental or, if it’s a sale, list the property and work with local agents to get it successfully sold.
Sponsor Partnerships Give Developers A Way To Leverage Gatsby’s Track Record Of Success
To date, Gatsby has never lost money on a deal and its average annualized net return to investors between 2017 and 2022 was 24.22%. For developers, sponsorship is a way to leverage that track record for success and tap into a large, existing network to continue to grow alongside the company.
For Gatsby, maintaining that successful track record of completed properties means being selective about who it partners with. To get a project approved for sponsorship, developers have to demonstrate their knowledge and success in the market. That typically means at least 10 years of experience in real estate, with at least five in a specific niche like single-family flips or multifamily developments or value-add multi-family.
Using these criteria, Gatsby is hoping to build an extended network of developer and operator partnerships that stretches far beyond Los Angeles. Through sponsorship, it can expand into hundreds of markets, partnering with local developers who already have the kind of insider knowledge needed for a successful investment.
Visit Gatsby Investment to learn more about Sponsor Partnerships.
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