Roofstock Review: Rental Property Investing

If you’ve ever wanted to have a real estate investment portfolio of rental properties, but can’t come up with hundreds of thousands of dollars to do so, you may now be in luck, thanks to Roofstock.

Roofstock is a real estate investment marketplace that aims to make ownership of investment real estate “radically accessible, cost-effective, and simple.”

In this Roofstock review, we all assess the services the company offers and examine how those services stack up against the company’s stated mission of making investment real estate accessible, cost-effective, and simple.

What Is Roofstock

Roofstock a California-based real estate investment company that was founded in 2015 by Gary Beasley; he is also the current CEO of the company.

The company has received series A, B C and D funding totaling over $133.3 million dollars. Roofstock has also acquired Streetlane, a single-family rental management company based in Dallas TX.

What Does Roofstock Do?

Roofstock serves as an online marketplace for investing in leased single-family rental homes.

Here’s how that works. Roofstock will pre-inspect rental properties and obtain information about the tenant, the rent, and the company that manages the property. If the property is a viable investment property, Roofstock will list the property on its website along with all the information needed for investors to make an investment decision.

Roofstock has hundreds of investment properties on its website to choose from. Investors can analyze each property in select the ones that fits his or her budget and investment strategy.

Roofstock has all the tools on its website to help investors make an informed decision. For example, investors can view property inspection reports, property photos, and neighborhood ratings. Investors can also see taxes on the property, schools in the neighborhood, and average rent in the neighborhood.

Prospective investors will then evaluate all the information about the property to make an informed decision about whether or not to invest.

How Does Roofstock Work?

Investing in single-family rental homes with Roofstock is easy and straightforward. Here’s how it works:

• Find a property on Roofstock that fits your investment strategy
• Use Roofstock tools and resources to evaluate the property
• Put the property in contract by checking out on the Roofstock website and paying the 0.5% marketplace fee with a credit card. You can also negotiate the property price.
• Roofstock then helps you to close on the property by advising you on financing, insurance, and property management.
• Once you close successfully, you can start receiving income from your rental property.

The process is that simple and straightforward.

Services Roofstock Offers

Roofstock is broken down into two sections: Roofstock Marketplace and Roofstock One.

Roofstock Marketplace, which is what we are discussing in this section, serves as an online marketplace for buyers (investors) and sellers of real estate.

The company has streamlined the investment process in a way that allows investors from anywhere in the world to close on a property–completely online — without the need to physically see it.

On Roofstock’s website, an investor can search for a property of his or her choice, analyze the property by reviewing property inspection reports, title reports, floor plans, and other pertinent details. The investor can also hire a management company to manage his or her property through the Roofstock platform.

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What Is Roofstock One?

Roofstock One is one of the two main services that Roofstock offers. For as low as $5000, Roofstock One allows accredited investors to buy shares in individual rental homes. Here’s how that works:

Imagine you’re interested in a $500,000 investment property but can’t afford the total amount. With Roofstock One, by investing $5,000, you can join forces with other investors to partially own the property.

To make the process easy for investors, Roofstock does the following for all the properties listed under Roofstock One:

• Roofstock finds the properties with rental potential
• Vet the properties
• Acquire the properties, and
• Finance the properties
• The properties are held in a trust and shares are issued to investors

Investors can choose to buy shares in several different properties, own the entire property, or just own share in one property.

The benefit of this process is that the investor gets to enjoy all the economic and tax benefits of owning the property without the headache that comes with managing it.

What’s An Accredited Investor?

According to Investopedia, an Accredited Investor is someone who is allowed by the government to deal in securities. An Accredited Investor must have an annual income, starting from at least two years prior, of more than $200,000, for individuals or $300,000 for couples.

How Is Roofstock One Different From Roofstock Marketplace?

With Roofstock One, Roofstock acquires the properties and holds them in a Trust. Investors can then purchase a stake in a property by investing at least $5000. Roofstock retains a 10% stake in the property — at least for the first year.

Roofstock Marketplace, on the other hand, is just as the name implies — a marketplace; albeit, with a twist. Let me explain.

While other real estate marketplaces like Zillow.com or Redfin.com only lists properties, Roofstock Marketplace goes further by independently screening, appraising, and certifying its properties with the hope of giving investors the confidence they need to invest.

Roofstock Marketplace helps investors with securing financing and property managers. Because Roofstock Marketplace properties are rental investment properties, Roofstock ensures that the properties have tenants already in places so that investors can start receiving cash-flow from day one.

How Does Roofstock Make Money?

Roofstock Marketplace makes money by charging a 0.5% marketplace fee or $500, whichever is higher, to people buying and selling properties on the website. The marketplace fee is calculated on the contract price.

How To Join Roofstock

Anybody with a thousand dollars can join the Roofstock Marketplace and start investing in single-family rental homes. Roofstock One, on the other hand, only accepts accredited investors who are willing to invest at least $5000.

According to Roofstock’s website, purchasing an investment property on the platform is not limited to US residents. People from around the world can also purchase investment properties on the platform.

How Do I Buy A Property On Roofstock

On Roofstock, investors can purchase either a property, a portfolio of properties, or property shares; and here’s how that works.

Property Purchase

To purchase a property on the Roofstock Market, you’ll have to browse through the investment properties on the website and select the property that most aligns with your investment strategy.

All the properties on Roofstock’s website are thoroughly vetted and are cash-flow positive. Once you select the property of your choice, you place it in your cart, check out, and pay the marketplace fee. Roofstock will send you an e-mail with the Purchase and Sale Agreement (PSA) along with a $1500 Ernest Money Deposit (EMD) bill.

Once you pay the EMD bill, typically, within three days of signing the PSA, You can choose the financing company, property management company, and insurance company for your property.

Finally, you’ll sign the closing documents and fund the purchase.

Portfolio of Properties

This is a pre-packaged diversified portfolio of real estate investment properties. It differs from Roofstock’s regular property purchase in that it allows you to spread your risk by investing in a diversified portfolio of properties.

Here’s how that works:

• You do a bulk-purchase, picking from a variety of real estate portfolios in different cities or states.
• Select the best financing option
• Close the deal — all 100% online, relying on Roofstock to coordinates the entire process, including scheduling inspections

Property Shares

This is a Roofstock One service that allows Accredited Investors to buy shares of an individual rental home for as low as $5000. This investment is intended to be a true source of passive income because the investor is not burdened by any of the headaches of being a landlord.

Roofstock One takes care of all the associated property management headaches and the investor reaps the profits and tax benefits of being a part-owner of the property.

Here’s how to purchase a Roofstock property under Property Shares:

• Go to Roofstock’s website and select the property you are interested in acquiring (They are all vetted and selected for their investment potential.)
• Choose the number of shares you want. Alternatively, you can choose to own the entire property, save but for 10% ownership for Roofstock. As stated before, Roofstock retains at least 10% fractional ownership in the properties for at least a year.
• Review the terms of the investment; if satisfied, sign, and fund.
• Earn passive income without the headache of dealing with tenants.

Is Roofstock Legit

Yes, Roofstock is a legitimate company that is fully accredited by the government to operate. You can learn more about Roofstock business by visiting its website here.

What Are The Risks Of Investing With Roofstock?

There is always a risk that you could lose money when it comes to investing in real estate. There’s also the prospect of making a lot of money. Roofstock does not control those odds. However, they do a good job of vetting the properties and ensuring that the properties are cash-flow positive before listing them as potential investment properties. This helps to mitigate the risk of losing money on the investment.

But, as with any investment, prospective investors should carefully study the investment before taking the plunge. Ideally, they should want to consult their own legal, tax, and investment advisors before making an investment decision. Roofstock does not serve as a fiduciary or advisor with respect to any investment on its website.

Roofstock Pros And Cons

Who Can Invest With Roofstock?

According to Roofstock’s website, you can invest in properties listed on its website from anywhere in the world. It does not explicitly indicate that only Americans are eligible to invest.

However, because investment on Roofstock’s website are legally binding contracts, you will have to be at least 18 years old to start investing on the platform.

Why Is It So Inexpensive To Invest With Roofstock?

With Roofstock One, it is relatively inexpensive to invest in a property because investors are not required to purchase the entire property — which may cost a lot.

Investors have an option to acquire fractional shares in an investment property. This means the cost of the property is split between several investors; each owning a fractional stake in the property.

An investor can own 1/10th of a property depending on how much they invest. They can also opt to own the entire property, though Roofstock may co-own a 10th in the beginning.

How Much Does It Cost To Invest With Roofstock?

It cost a minimum of $5000 to invest in Roofstock One. There’s also a 0.5% marketplace fee and $1500 Ernest Money Deposit that you have to pay after signing the Purchase and Sale Agreement for properties on the Roofstock Marketplace.

What’s The Difference Between Roofstock And Fundrise?

Both companies allow ownership of fractional shares in crowdfunded real estate. However, there are a few differences between the companies. Here are some of the major differences:

There’s a lower entry barrier to investing on Fundrise. The company requires only $500 to start an investment account. Roofstock, on the other hand, requires up to $5,000; plus, you have to be an accredited investor.

To Roofstock’s credit, they also have a marketplace that allows individuals to purchase single-family investment properties–something Fundrise does not have.

What If I Don’t Like My Roofstock Property?

If you don’t like a property you purchased on Roofstock, you have 30 days to register your dissatisfaction and begin the process of getting a refund.

Roofstock will re-list the property free-of-charge on its marketplace will you a full refund regardless of whether or not the property sells at or below the full price.

If the property doesn’t sell within 90 days, Roofstock will repurchase it and refund you. In both cases, however, you will be responsible for the closing cost.

How Can I Cash-Out From Roofstock?

While Roofstock One investments are intended to be longterm investments, an investor can still exit an investment after a six-month hold period.

As for investment properties acquired on the Roofstock Marketplace, you can sell your property anytime you wish, as you would with any real estate.

How Can I Close My Roofstock Account?

Once you successfully opt-out of your Roofstock One investment, you can choose to close your account.

As for the Roofstock Marketplace, once you sell your property, you can choose to close your account by logging in and selecting the option to close the account permanently.

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Roofstock Review: Bottomline

Roofstock makes it easy to own profitable real estate investment properties without the headache of dealing with tenants.

This business model is suitable for busy people who don’t have the time to manage multiple properties in different locations personally.

Roofstock’s innovative tools and personnel help investors through the entire process–from acquiring the property to finding the right management property.

If you’ve ever wanted to invest in a single-family rental property, Roofstock can make it happen.

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