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Roofstock wants to make buying and selling investment properties as easy as Robinhood made buying and selling shares of stock. They state that their company’s mission is to “make ownership of investment real estate radically accessible, cost-effective and simple”. Since real estate investing has traditionally been reserved for people with access to money, financing, and know-how, Roofstock could potentially make real estate investing accessible to millions of people.
The company was founded in 2015 but has already surpassed $4 billion in transactions (properties bought and sold on their platform). Roofstock has been featured in Tech Crunch, Wall Street Journal, and CNBC.
What is Roofstock?
Roofstock is the #1 marketplace for buying and selling investment properties. They make it incredibly easy for sellers to list properties for sale and for buyers to browse and buy investment options. The ability to buy properties that already have a lessee is a main selling point of the platform. Since one of the main risks of buying real estate is not being able to rent it out quickly after purchasing, this solves a major problem for investors.
Roofstock is still growing but currently has properties listed for sale in 27 states. The company itself has been recognized with several awards, including Benzinga Best Real Estate Platform, Finovate Best Alternative Platform, and Forbes Fintech 50 Most Innovative Companies.
Roofstock offers a slew of valuable services, but their main three are:
- Roofstock marketplace – Browse properties for sale and explore factors like market rent, cap rate, asking price, and other information.
- Roofstock One – Instead of buying an entire property, accredited investors can purchase shares of Tracking Stocks tied to the economic performance of fully managed single-family rental (SFR) investment properties.
- Other Roofstock services – Roofstock also can help connect you with other services, from providing estimates on the fair market rent of your property through the Cloudhouse Rental Calculator to matching you with professional property management companies. They even support landlords who self-manage their rentals with free, robust property management tools available through Stessa, a Roofstock affiliate.
Roofstock makes it incredibly easy if you want to post a property for sale on their site:
- Submit a listing – Upload pictures and a description of your property. They provide you with a free price estimate to help you strategically price your property.
- Roofstock diligence – They perform their own due diligence on your property before your listing is published. This may include having the property inspected, securing a title report, and putting together information concerning the rental history.
- Launch your listing – Your property will be listed in front of a global network of real estate investors.
- Receive offers and close – Investors can now submit offers to buy your property. You can accept, counter, or decline any offer. Once you receive an offer you like, Roofstock oversees closing the transaction.
Since Roofstock helps beginners get into real estate investing, the company has gone above and beyond to provide educational material. This includes a podcast, blog, knowledge center, rental calculator, andeven financing calculator that can connect you with an experienced lender, if desired.
Roofstock Fees and Pricing
It is free to make an account on Roofstock, and their fees are competitive and transparent. Here is a breakdown of fees:
- For listing – It’s free to list a property for sale on Roofstock.
- For selling – When your property is sold, you pay a fee of 3% of the sale price or $2,500, whichever is greater.
- For offering – It’s free to make an offer on a property. However, if your offer is accepted, you will pay 0.5% of the contract price or $500, whichever is higher.
Roofstock Review: Pros and Cons
All investment platforms have pros and cons based on what you are looking for as an investor. In many situations, a feature that one investor considers a pro might be considered a con by another investor.
Let’s review potential pros and cons of using Roofstock’s platform.
- The preferred site for selling SFR investment properties – Roofstock makes it easy to list your SFR property for sale and have it seen by thousands of investors. If you have tenants in place, it will come as a relief that you will not need to stage and show the property or displace your tenant. You can list your property on the Roofstock site and continue to collect rent until the day of closing.
- Comes with a tenant – Many of the properties for sale come with a tenant already living there. For purchasers, this eliminates a big risk that comes with purchasing a rental property because you may be able to have cash flowing in immediately.
- You can buy Tracking Stocks tied to the SFR sector – The ability to buy into a passive REIT investment targeting the SFR asset class is incredibly interesting and could eliminate a main barrier to entry for most accredited investors (large upfront costs to place a down payment on a home).
- They walk you through the process – Anticipating the need for education, their website is stuffed with information that teaches you how to use Roofstock and how real estate investing works.
- Transparency – They make a point of including all relevant information related to a property. This includes operating income, neighborhood rating, cap rate, yield, current rent, etc. This saves you research time and helps you make more informed decisions.
- Safety – Real estate investing is complex. However, by buying a property on Roofstock, you can easily perform due diligence to understand the recent performance of the property as a rental property before you buy.
- Confined to their platform – If you want to use Roofstock then the entire process is handled on their platform. This can be a negative thing if you are someone who likes to take control of the process.
- Limited options so far – At the time of this writing, there are over 1,000 properties listed for sale, which is certainly not the total for sale in the United States. However, Roofstock has expanded to offer select properties, which are also listed on the MLS.
- Might want more hand-holding – The majority of homes for sale are transacted through the platform, but Roofstock does offer homes—termed ‘Select’—in which the seller works with a local broker.
- Mainly SFR homes – Roofstock’s priority is single-family rental (SFR) properties. Therefore, of the over 1,000 properties that they currently have listed for sale, a little over 80% of their homes are single-family rentals. If you are looking to invest in apartments, condos, townhomes, commercial, or anything that isn’t a home, you will have fewer options to choose from.
Roofstock Review: Potential Returns
Roofstock does not make any claims of potential returns on its website. However, since they provide you with things like the net operating income, the asking price, and the current rent, you may be able to calculate what your anticipated return will be based on how much money you put down to buy the property.
It is always a good idea to do your own due diligence and not take the stats on their site as your only source. Doing your own due diligence can alert you to deals that might be less rosy than they appear to be. On the flip side, it can also bring prime deals to your attention that might not seem so great on the surface.
The average return of real estate depends on the type of property you purchase and the type of financing you use. However, according to Mashvisor, the average return of real estate in the U.S. is 8.6%.
Roofstock Review: Investment Risks
The biggest risk associated with using Roofstock’s platform is that it is still fairly new. Although everything seems very legitimate, they have an incentive to get as many properties listed and sold on their platform as possible.
There are also risks inherent in real estate investing that you should be wary of. At any moment, the market could turn and leave the property you purchase to be worth less than you bought it for. There is also the risk that a tenant could move out and cut off your cash flow for several months. These types of risks are outside of Roofstock’s control.
A Final Word on Roofstock Review
After thoroughly examining their platform, Roofstock is trying (and so far succeeding) in bringing groundbreaking change the real estate investment industry. Their platform is still young and, while expanding, is primarily focused on single-family rental real estate. However, as they start to gather more listings, they will likely become a household name.
If you are new to real estate investing and would prefer that someone guide you through the process, then Roofstock is a great option for you. If you are a seasoned real estate investor who has had no problem identifying and buying your own properties, you will probably benefit from using Roofstock’s platform for their proprietary data and analysis, management resources, and selling your property.
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