Investment properties come with a lot of maintenance. Where should you buy? Are you getting a fair price? What about renters? You can get answers to all of these questions and more under one roof… Roofstock. Here’s our full review.
- Owning a real property
- Joining Roofstock is free
- No legal work involved
According to a report by GoBankingRates, half of the U.S. population is at risk of going broke because they have less than $10,000 in retirement savings. Even those who realize the importance of investing don’t always know how and where to put their hard-earned money to get a return.
Banks may seem like a safe and viable option, but safety when it comes to money means low returns, and that’s often the case with banks as they dish out single-digit return rates. However, in the age of the internet where everything becomes accessible with just one click, investing has been made easy.
In this article, we’ll talk about one of the most secure avenues of investment in the market–real estate. Since most of us probably have no prior market experience, you may be wondering how you can invest thousands of dollars feeling safe and secure about your investment.
Enter Roofstock. Below is a detailed review of this exciting new platform.
Roofstock is an online platform that connects buyers and sellers of single-family home units. Listed properties are vetted, certified, and appraised by a team of professionals and data scientists who browse through tons of properties before putting forth the most optimal ones for investment.
So it’s a digital investment platform that allows you to buy stock, i.e. rental homes, online with no hassle.
A key component of their business model is that houses can change multiple owners without the tenants having to leave the property. This means when you buy rental property through Roofstock, renters are vetted through the company’s compliance policy, and are already occupying the property and paying rent.
You must be wondering “how can I trust the validity of the listed properties?”
Just to show you how thorough the process is, below are some requirements that listed properties have to meet before they are put up on Roofstock’s website for sale.
- A house inspection performed by a certified firm
- Estimation of small and large maintenance/repair costs by the firm
- A detailed examination of the local property market and rental costs
- A full tour of the listing in 3D
- Detailed plans of the house
- Review of the renter’s lease plan
- Analysis of the renter selection method
What Makes It So Different?
Roofstock offers an alternative method for real estate investment that’s more convenient than the conventional method. You don’t have to hire a realtor, visit different properties and find reliable tenants. The work involved conventionally is too much of a hassle for today’s fast-paced lifestyle.
It might be easy to confuse Roofstock’s concept for a real estate crowdfunding platform. Most crowdfunding platforms involve investing cash in a tiny piece of a development project with a timeline attached to it.
But an investor working with Roofstock actually owns the property right away, no strings attached. It’s merely a more accessible and cheaper way of buying rental property without the usual hassle. Roofstock properties are generating cash for their owner from day one as they already have approved renters living on the property.
- Free to join: In an increasingly money-minded world, it’s hard for free stuff to come by. One of the best features of Roofstock is that they let you join for free so you can look for your next investment ASAP.
- The process is certified from start to finish: A listed property on Roofstock has been reviewed and vetted by professionals. Complete documents exist for all listed properties including items like home disclosures verified by home inspectors. The company’s CEO Gary Beasley was heading one of the largest publicly traded companies dealing in family rentals. So, the leadership and the team behind Roofstock is rock solid.
- User-friendly platform: The website is easy to use even for users who are not tech-savvy. The searching model is simple and allows investors to browse through different properties, choosing the one which meets their requirements.
- Turnkey: Roofstock handles all the issues associated with the purchase of a property. This means you can buy a property from across the country without ever having to step foot in it yourself. The company makes sure that you don’t have to deal with a lot of logistical issues.
- 30-day guarantee: The website states that every property comes with a 30-day guarantee. If you find the property not up to your standards or feel buyer’s remorse, you have almost a month from the closing date to ask for a refund. This guarantee comes with certain specifications such as no significant changes to the property. However, the website promises to sell your investment within 90 days, or they will repurchase it themselves. This is a rare commitment which is made by almost no other player in the investment market.
Roofstock has a team which has a wealth of experience behind them in building and managing real estate, especially in the rental space. Networking and contacts are a significant advantage in the real estate market.
Real Estate Investment Trusts (REITs) are companies that manage and buy hundreds and thousands of properties. Sometimes, these trusts have to sell properties due to various reasons, which is a complicated and time-consuming task. That’s where Roofstock comes in.
Roofstock works directly with such trusts or large holding companies to smoothen the transition process of ownership exchange. Roofstock negotiates the best price for its investors and reduces much of the overhead costs for the trusts and funds.
Since Roofstock’s turnover rate is relatively high as compared to the large holding trust funds, it lists the properties for less while charging a lower commission as compared to realtors. So, the savings that Roofstock creates are actually passed down to the investor.
A Guide for Buyers
The buyer’s journey on Roofstock begins in the search area where you can browse through properties based on your desired location, return, and more.
After choosing a property, you can view detailed specifications about the house which are part of Roofstock’s certification. Three main components make up the property analysis:
- Pricing Appraisal
- Title Report
The first two points are easily understandable and act as a support for the listing price. The inspection part is what sets Roofstock apart.
The inspection analysis covers many details, no matter how big or small. The full report is approximately 12 to 15 pages long, depending on the property. Additional pictures and descriptions are also included where deemed necessary.
The report aims to familiarize investors with the property before buying it. The company wants no nasty post-purchase surprises awaiting their clients.
The next step of the process is the checkout area. Here you’ll be presented with two options; ‘Buy Now’ and ‘Negotiate.’
In the ‘Buy Now’ option, you’ll pay the full-listed price and the property is taken off the website and reserved for you till a company representative calls you with further instructions.
When you select the ‘Negotiate’ option, you get to make an offer and see if it gets accepted.
The company has a straight forward pricing structure in place. Instead of charging the usual 6%, that most market realtors charge, Roofstock charges sellers a 2.5% fee or $500 (whichever is greater).
For buyers, the fee is 0.5% or $500, whichever amount is greater. Registration on the site is free.
Financing a Purchase
One of the most challenging tasks facing a young investor is the question of capital. Where to find money for the purchase?
Roofstock has an integrated solution for financing your purchase if you are creditworthy enough. It’s crucial to understand that since these aren’t typical homes you can live in but rather a commodity for investment, the mortgage structure would be different.
Roofstock requires at least 20% of the property’s value as an upfront down payment. The interest rates are also slightly higher than the average mortgage.
A higher upfront capital payment and higher interest rates indicate that lenders consider investment properties a more significant risk when compared to mortgage for traditional homes.
Most customers who purchased properties on Roofstock came back primarily due to their stable team.
Within 24 hours of choosing the ‘Buy Now’ option, you are contacted by a representative who guides you through the next steps involved to complete the transaction and gain ownership.
Customers reported it as one of the most straightforward transactions they ever did for becoming the owners of a rent-paying property. Buyers far away from the properties also reported on the ease of doing business. Owning a listed property involves these steps:
- Pay the market fee
- The signing of the purchase contract
- Transferring the earnest money
- Sending over financial details, if financing is required
- Signing the final property with a registrar
Pros and Cons
- Owning a real property: Unlike most real estate platforms where you own part of the project or just sit on empty houses, Roofstock offers rental properties in areas where estate prices are low, and rent is high. It's an excellent return on investment while giving you an additional revenue stream.
- Joining Roofstock is free: You don't have to pay anything to join the site. All properties are available to browse without even creating an account. However, to get more details regarding any desired properties, an account is needed. This shouldn’t be a problem since creating one is free.
- No legal work involved: Visiting each potential property estimating their value, doing a market analysis and seeking good tenants are demanding tasks. Roofstock just requires you to pick a property through their website and make a bid online. Even filling out the required documentation is online.
- The 30-day, money-back guarantee: If the property isn't up to your standards or you are not happy with it, you can apply for a refund within 30 days. Doing so means they will put the property back in the market for 90 days till which time you must maintain it. After 90 days, if no one makes a bid, Roofstock buys the property from you. You get the full amount back on your investment.
- Positive cash flow from day one: Unlike house flipping that requires additional capital on top of the purchase price, Roofstock homes are already rented. You’ll see positive cash flow from the time of purchase.
- Guaranteed rent even on vacant houses: If you buy a property with no tenants, after 45 days Roofstock steps in to pay almost 90% of the rent in the local market till the house is leased out.
- The site isn't just for accredited investors: Real estate investing requires more people to be an accredited investor (earning up to $200,000 a year). Fortunately for new investors, Roofstock has no such stringent requirement.
- You'll save on commissions: Standard market realtor fees are at least 6%. Even though it's the seller who’s paying the fees, the commission cost gets included in the sale price. Roofstock just charges 0.5% or $500, whichever is greater.
- You'll know extreme details about the conditions of each property: As part of their certification process, Roofstock gives you detailed reports on the listed properties including any repairs needed. This saves up time that could have been wasted in a property visit.
- Large down payment: Like any other house, you can apply for financing. However, lenders usually require a sizable down payment of 20 to 30% for homes that are not the owner’s primary residence.
- Large capital upfront: Any property purchase results in a massive outflow of cash. Investing in real estate is always capital intensive as you need to pay the market price for a whole house.
- Highly illiquid: Rental property is much easier to buy than to sell. You are purchasing an entire home in exchange for cash, and the property needs to be sold before getting the money back. Rental properties are long haul investments, and it takes months to sell a house.
- You'll need cash for rainy days: Homeowners are primarily responsible for general maintenance and upkeep of the property. Renters expect a broken dishwasher to be fixed the same day. You have to have cash on hand to carry out such unexpected repairs.
For other venues of investments that require less capital, investors can turn to REITs. A real estate investment trust (or REIT) is a business that purchases real estate to generate income from it. They are modeled after mutual funds and allow you to get a piece of commercial or residential property for meager amounts.
A riskless but a lesser return for an investor is found in government and company-issued bonds. They usually provide bond bearers with a stable form of income not far from the interest rate issued by the Federal Reserve.
This can be anyone who wants to buy real estate but doesn’t have the time required for diligence. Roofstock completes all the inspections to arrive at fair market value. You won’t even have to visit the property in person to make sure everything holds up.
People who want tenants but don’t know where to find good renters can also use Roofstock. Most properties on the website already contain renters.
People who want to invest in the 21 states Roofstock holds property in will also find the website a reliable source for discovering investment opportunities.
Overall, we love Roofstock as a new investment option. It does require more money up-front, but the pros far outweigh the cons. You used to have to find properties on your own, go see them, buy them, rent them out, and manage the property. Now you can do all of that with a few clicks online. Check out Roofstock if you want to diversify your portfolio today.