Detailed Roofstock Review 2020: crowdfunding real estate investment with Roofstock
Our Roofstock Review - Updated 30th June 2020
In almost every society, the value of investing money for better future returns is not emphasized enough. Our education system places great emphasis on subjects such as science, arithmetic, history and geography. While education related to investment problems is largely ignored.
According to the GoBankingRates survey, half of the U.S. population is at risk of being 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 make a return.
Banks may appear to be a stable and viable alternative, but safety when it comes to capital requires low returns, and this is always the case with banks when they set single-digit return rates. However, in the era of the Internet, where anything is available with only one click, investing has been made simple.
In this post, we're going to think about one of the safest opportunities for investment in the industry – real estate. Since most of us obviously don't have any prior business experience, you may be thinking how you can spend thousands of dollars to make your investment in a comfortable and stable manner.
Cue Roofstock. Here is an in-depth analysis of this groundbreaking digital platform.
What's Roofstock exactly?
Roofstock is an online marketplace linking buyers and sellers of single-family home units. The listed properties are audited, certified and assessed by a team of professionals and data scientists who browse through tons of properties before putting forward the most optimal ones for investment. It's a digital investing platform that helps you to purchase stock, i.e. rental houses online without any problems.
A core aspect of their business model is that houses will change several owners without the tenants needing to leave the home. This ensures that when you buy the rental property from Roofstock, the tenants are reviewed by the company's compliance policies and are renting the property and paying the rent.
Here are some of the requirements that properties need to meet in order to be listed on Roofstock's website:
- House inspection carried out by a professional organization
- Estimation of small and large maintenance/repair costs by the company
- A thorough analysis of the local property sector and the rental costs
- A complete 3D tour
- Detailed building plans
- Examination of the leasing contract of the occupant
- Study of the process of renter selection
What Makes It So Different?
Roofstock provides an innovative investing strategy for real estate that is more flexible than the traditional method. You don't need to hire a realtor, tour various locations, and select reputable renters. Conventionally, the job involved is too much of a challenge for today's fast-paced lifestyle.
It would be possible to misunderstand Roofstock's definition of a crowdfunding real estate website. Many crowdfunding sites include spending cash in a small portion of a development effort with a deadline added to it.
Yet the investor working with Roofstock owns the property straight away, no strings tied to it. It's just a more open and affordable way to buy rental property without the normal hassle. Roofstock properties produce cash for their owner from day one, as they have already accepted tenants residing in the house.
Key Features of Roofstock
- Free to join: In an extremely money-minded world, it's hard for free things to come along. One of the best aspects of Roofstock is that they make you enter for free so that you can search for the next investment right away.
- The method is certified from start to finish: A listed property on Roofstock has been inspected and evaluated by experts. Comprehensive records exist for all listed properties, including elements such as home disclosures checked by home inspectors. CEO Gary Beasley was in charge of one of the biggest publicly traded companies dealing with family rentals. Therefore, the leadership and the people behind Roofstock are rock-solid.
- User-friendly platform: The app is easy to use for people who are not tech-savvy. The search paradigm is easy and allows investors to check various assets, selecting the one that fits their requirements.
- Turnkey: Roofstock manages all things related to the purchasing of a house. This ensures that you can purchase properties from all over the country without ever having to see it on your own. The organization makes sure you don't have to deal with a lot of organizational problems.
- 30-day guarantee: The website claims that any property has a 30-day guarantee. If you consider the property not up to your expectations or have buyer's remorse, you have about a month from the closing date to ask for a refund. This guarantee comes with some specifications, such as no significant changes to the property. However, the website promises to sell your investment within 90 days or they will buy it back on their own. This is a remarkable effort made by virtually no other investor in the stock business.
How Does Roofstock Work?
Roofstock has a team that has a wealth of experience behind them in building and managing real estate, especially in the rental sector. Networking and connections are a significant advantage in the real estate market.
Real Estate Investment Trusts ( REITs) are firms that control and buy hundreds and thousands of properties. Sometimes these trusts have to sell properties for a variety of reasons, which is a complex and time-consuming process. That's where Roofstock is coming in.
Roofstock deals closely with these trusts or large holding firms to ease the transfer phase of the sale of property. Roofstock negotiates the best price for its investors and reduces a large part of the overhead costs for trusts and funds.
Because Roofstock's turnover rate is comparatively high compared to the big holding trust funds, it lists assets for less while charging a smaller fee compared to realtors. So, the savings Roofstock creates are actually passed on to the investor.
Guide to Buyers
The purchaser's journey to Roofstock starts in the search area where you can explore properties based on your desired location, return, and more.
Upon choosing a property, you can see the comprehensive house requirements that are part of the Roofstock certification. The property analysis consists of three main components:
- Pricing Evaluation
- Title Report
The first two points are easily grasped and serve as help for the listing price. The inspection aspect is what distinguishes Roofstock.
The inspection report includes multiple aspects, no matter how large or small. Based on the house, the entire report is about 12 to 15 pages long. Additional images and explanations shall also be provided where considered appropriate.
The purpose of the study is to familiarize investors with the property before purchasing it. The organization doesn't want some unexpected after-purchase surprises waiting for their customers.
The next step in the process is the checkout section. Here you will be confronted with two options: 'Buy Now' and 'Negotiate.'
In the 'Buy Now' option, you will pay the full price and the property will be taken off the market and reserved for you until you receive more instructions from the company representative.
When you select the 'Negotiate' option, you will be able to make an offer and see if it is accepted.
Roofstock Price System
The business has a straight-forward price structure in place. Instead of paying the usual 6 percent that most commercial realtors demand, Roofstock charges sellers a 2.5 percent fee or $500 (whichever is higher).
To consumers, the price is 0.5 percent or $500, whichever is greaster. Registration on the website is free of charge.
Financing a Purchase
One of the most challenging tasks facing a young investor is the question of money. Where to find the money for the purchase?
Roofstock provides an automated approach to fund your purchase if you are creditworthy enough. It's important to realize that because these are not typical houses you will live in, but an asset for investment, the mortgage arrangement will be different.
Roofstock needs at least 20% of the value of the property as an initial down payment. The interest rates are also marginally higher than the normal mortgage rate.
Higher upfront capital costs and higher interest rates suggest that lenders find investment property to be a greater risk than conventional home mortgages.
Customer and After-Sales Service
Most of the customers who purchased properties on Roofstock came back mostly because of their stable team.
Within 24 hours of selecting the 'Buy Now' option, you will be contacted by a representative who will lead you through the next steps involved in completing the purchase and gaining ownership.
Customers have described it as one of the most simple purchases they have ever made to become owners of rent-paying properties. Buyers far from the property have mentioned the ease of doing business. Owning a classified property includes the following steps:
- Pay market fees
- The closing of the document of purchase
- Transferring the earnest money
- Sending financial details, if funding is necessary
- Signing of the final property with the registrar
Pros & Cons
- Owning real estate: Unlike most real estate sites where you own part of the project or just sit on empty houses, Roofstock provides rental properties in places where home prices are low and rent is high. It's an outstanding return on investment, offering you an additional revenue stream.
- Joining Roofstock is free: You don't have to pay for joining the site. All properties are available for searching without creating an account. However, in order to obtain more information regarding any desired property, an account is necessary. This isn't supposed to be a concern because making one is easy.
- No legal work involved: Visiting each potential property, estimating its value, conducting a market analysis and looking for good tenants are demanding tasks. Roofstock allows you to simply pick a property from their website and make an online bid. You may also fill out the needed paperwork online.
- 30-day money-back guarantee: If the property is not up to your expectations or you are not satisfied about it, you will ask for a refund within 30 days. Doing this ensures that the house can be brought back on the market for 90 days and until that moment you need to maintain it. After 90 days, if no one makes a bid, Roofstock must buy the property from you. You'll get the full balance returned on your investment.
- Good cash flow from day one: Unlike house flipping that needs extra money at the top of the purchase price, Roofstock homes are already leased. From the moment of purchase, you'll see a healthy cash balance.
- Guaranteed rent even on empty houses: If you purchase a property without tenants, after 45 days Roofstock would pay nearly 90% of the rent on the local market before the house is rented out.
- The platform is not only for licensed investors: Investing in real estate asks of people to be an accredited investor (having up to $200,000 a year). Fortunately, Roofstock does not have such a strict requirement for new investors.
- You save on commissions: The regular market realtor fees are at least 6%. And if the seller pays the fees, the commission costs will be included in the sale price. Roofstock only pays 0.5 percent or $500, whichever is greater.
- You will learn extensive information on the conditions of every property: As part of their certification process, Roofstock provides you with comprehensive reviews on the properties mentioned, and any fixes required. This saves money that may have been lost on a property tour.
- Large down payment: Like any other home, you will apply for funding. Nevertheless, lenders usually require a large down payment of 20 to 30 percent for properties that are not the primary residence of the owner.
- Big capital upfront: Any purchase of property results in a massive outflow of cash. Investing in real estate is always capital intensive, as you need to pay the market price for the entire house.
- Extremely illiquid: Rental properties are much easier to buy than to sell. You're buying a whole home in exchange for cash, and the property needs to be sold before you get the money back. Rental properties are long-distance investments, so it takes months to rent a property.
- You will need cash for rainy days: Homeowners are mainly responsible for the general upkeep and maintenance of the property. Renters expect a faulty dishwasher to be replaced on the same day. You've got to have cash on hand to make these emergency fixes.
Who Should Use Roofstock?
This could be anyone who wants to buy real estate but doesn't have the patience for diligence. Roofstock shall complete all checks in order to achieve fair market value. You're not even going to have to tour the house in person to make sure it keeps going.
People who want tenants but don't know where to find good tenants can also use Roofstock. Most of the property on the website now include tenants.
Those who want to buy in the 21 states in which Roofstock owns assets will also consider the platform a reliable source for finding investment opportunities.
Overall, we like Roofstock as a new investment option. It does take more money in the first place, but the benefits greatly outweigh the cons. You used to have to find your own properties, go and see them, buy them, rent them out, and manage the property. You can do all of this now with a few taps online. Check out Roofstock if you're looking to diversify your investments today.
Roofstock main features and highlights