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In this Roofstock review, we’ll discuss the pros and cons of Roofstock, explore how it works, and explain who it might be best for. Enjoy!
If you’ve ever considered investing in real estate, but don’t have time or knowledge on your side, Roofstock may be a good place to start. If you’re a seasoned investor, but want to expand your reach, I invite you to kick the tires, too.
In this review, I’ll share how to get started with Roofstock and how it works. I’ll also share some benefits and drawbacks of using the platform to help you decide if it’s right for you.
What Is Roofstock?
With more than $2 billion in completed transactions, Roofstock is a licensed real estate brokerage turned e-commerce solution for investing in single-family rental (SFR) homes. The company’s leadership brings together top SFR industry investors and fintech standouts such as CEO and co-founder Gary Beasley, named a 2019 Top 50 Fintech CEO by the Financial Technology Report.
The company, launched in 2016, touts itself as “the first online marketplace created exclusively for investing in SFR homes.” Roofstock allows you to buy rental properties with help from an array of tools that allow you to research and analyze your options and their respective markets. You can also sell properties or purchase investment portfolios or property shares.
Roofstock currently offers investment properties in more than 70 high-performance markets across 25 states. The company is actively seeking opportunities to expand into new, profitable markets, as well.
How Do I Get Started With Roofstock?
You can quickly register with a free profile that uses a quiz-style approach to determine your investment goals. To buy properties, you’ll need a budget of at least $20,000. If you’re interested in purchasing an investment portfolio, you must be able to meet the minimum purchase requirement. If you want to buy property shares, you must be an accredited investor.
How Does Roofstock Work?
Roofstock makes investing convenient by enabling you to accomplish 100% of your transactions through the interface. Using the Roofstock platform, you can:
- Buy a Property: Roofstock provides tools for you to search for properties in your preferred market, analyze property data, make an offer, purchase the property, navigate the closing process, and choose a licensed, preferred property manager to handle the day-to-day needs of your rental property.
- Sell a Property: You can register and enter property details and Roofstock will provide a free valuation report. Set your pricing and Roofstock will gather all pertinent data to create your listing. Manage offers, sell the property, and close – all online.
- Build an Investment Portfolio of Properties: Browse, analyze, make offers on, and close on portfolios of two or more properties. Choose your property management team for your properties and diversify in different markets.
- Buy Shares of Properties: Accredited investors can purchase shares through Roofstock One, a Roofstock partner that allows you to earn passive income from fully-managed Roofstock SFR properties.
Buying a Property
The Roofstock interface allows you to search for properties in one or more markets with the ability to filter preferences like list price, monthly rent, higher appreciation, year built, neighborhood rating, and more. You’ll also get easy access to stats on:
- Total return over time
- Annualized return
- Cap rate
- Gross yield
- Cash flow
Once you’ve chosen a property, you can make a bid for the full listing price or negotiate. Once your offer is accepted, you’ll pay either 0.5 percent of the contract price or $500, whichever is greater, and an earnest money deposit of $1,500, which will go toward the down payment or closing costs.
You may complete a purchase via cash or financing. Closing begins once your bid is accepted and typically takes 15 days for cash transactions and 30 days for financed purchases. Roofstock helps you choose a licensed property manager. After closing is complete and the sale is finalized, money starts rolling in.
Selling a Property
You can list properties for sale on Roofstock while continuing to collect rental income through closing. You’ll have the ability, tools, and support to market your properties to interested buyers in the U.S. and overseas.
After submitting your listing, Roofstock will generate a free valuation report, help you set the right price, gather details to help buyers make an informed choice, and communicate with your current property managers and interested buyers on your behalf.
From your Roofstock dashboard you can view and manage offers, accept bids, and navigate the closing process. You’ll pay a listing fee of 3% of the sale price or $2,500, whichever is higher.
Building an Investment Portfolio of Properties
You can buy a group of properties currently generating cash flow, effectively diversifying your rental property investments. These are often multi-unit or multi-home portfolios with a minimum purchase requirement. For example, there may be a listing with 50 properties available with a minimum purchase of 25 properties. You’ll have access to the same tools to analyze, make offers, and close.
Additionally, you can work with BrightForge, a Roofstock partner that will manage the portfolio procurement process from day one.
Buy Shares of Properties
If you’re focused on generating passive income without property management concerns and you want to diversify your holdings, consider buying shares at $5,000.
Benefits of Using Roofstock
- Free to Register: It’s free to create an account and look around. There are also free resources and tools like the Roofstock Learning Center and the Cloudhouse Rental Calculator available without registering.
- It’s Simple: If you’re unsure how to start investing in real estate, but ready to get started, Roofstock may fit the bill. You’ll have an opportunity to own property and earn rental income without having to handle tenant issues, thanks to the property management company you’ll hire through Roofstock.
- Flexibility: If you want to skip owning a property, but still want residual income, you can buy shares of existing properties. If you are considering financing, you also have a choice to get pre-approved with a Roofstock lending partner.
- It’s Diversified: You can build an investment portfolio, diversify shares, and even buy and hold your investment properties in a self-directed IRA through a Roofstock partnership with New Direction Trust Company. Need help with a 1031 exchange? Roofstock offers a service to expedite your purchase to meet a 1031 timeframe.
- It’s Time-Saving: Roofstock does the heavy-lifting, from gathering information to helping you with paperwork and communicating with multiple parties. This provides more time freedom as you build your nest egg. You can log in and manage your investments instead of having to jump on a plane or spend countless hours on phone calls.
- Transparency: Fees are clearly stated, and you have the option of emailing Roofstock or talking to a representative for general questions about fees and getting started.
- Investor Education: For a one-time fee, you can gain lifetime access to Roofstock Academy, a self-paced, on-demand real estate investing course with one-on-one coaching and a members’ forum to connect with like-minded investors.
- Property Certification: While there are a handful of turnkey properties owned and listed by Roofstock, most listings are independently owned. There is a certification process for each market, rental home, and preferred property management company connected to Roofstock.
- It’s Guaranteed: If you’re not satisfied within 30 days of closing, you can get a refund. Roofstock also guarantees rent on vacant properties 45 days after your property is ready to rent, with zero property management fees until your rental is leased. You can read the details here.
- It’s Not Quick: This isn’t exclusive to Roofstock, but be aware that if you’re investing in rental property, you need patience. Some companies may offer quicker returns on your money, but even with help from the Roofstock team, you’ll want to complete your due diligence before investing.
- It’s Limited: When you buy or sell with Roofstock, you are limited to their certified markets. And while there are more than 70 markets to choose from, if you’re focused on a specific area that the company doesn’t cover, you’ll have to get on a waitlist.
- It’s Expensive to Start: You’ll need some capital to get started, and while that goes without saying, there are some other options out there, such as Fundrise, that offer a lower pricing threshold to begin investing.
Who Should Consider Investing in Roofstock?
Roofstock may be a good option for new real estate investors because it offers a lot of support throughout the process. More seasoned investors might appreciate the variety of options. Other good fits for Roofstock may include:
Real Estate Investors Who Want to Skip Tenant Interaction: Those who want the autonomy of ownership without having to deal with tenant issues may be drawn to Roofstock. For a fee, investors can offload renter woes to property managers.
Investors Interested in SFRs: Interested in SFRs, but finding it difficult to tap into the market? This may be a good introduction.
Real Estate Investors Seeking Diversification: Roofstock has built-in diversification options for purchasing property portfolios or shares.
Accredited Investors Looking for New Opportunities: Accredited investors must meet certain criteria. Their access is only limited by the investment decisions they make.
Who Should Avoid Investing in Roofstock?
By nature, real estate investing is not liquid, meaning returns are not easily converted into cash. If you’re just getting started and are looking for more cash flow, this may not be the best option. You should avoid investing in Roofstock if:
You Aren’t Contributing to a Retirement Plan: If you haven’t set one up or aren’t contributing, it’s best to get this tax-advantaged account established and your retirement strategy set first, especially if you have access to employer matches for 401(k) plans.
You Don’t Have an Emergency Fund: Real estate investing can be lucrative and exciting, but it’s not a fallback in an emergency. Set up an emergency fund that can cover three to six months of expenses as a cushion when hard times hit.
You’re Looking for Short-Term Yields: Looking for fast cash? This is not it. This is a long-term option for building wealth.
Final Thoughts on Roofstock
If necessity is the mother of invention, then real estate investing companies like Roofstock are paying attention to what’s needed and what’s next. The days of sitting in “free” real estate investing seminars to glean a morsel of direction are numbered. Simplified, time-saving access is the name of the game now, and Roofstock is a solid choice among its competitors.