Many people look at investing as a way to achieve their financial goals in life, whether it’s retirement, financial freedom, saving for college, and so on.
And they’re not wrong about that, considering that when you invest, it’s basically your money that is working for you. It is the one that does everything in order to grow and allow you to make more money.
Now, one of the lucrative markets to invest in is the real estate market. However, it is also not the easiest investment to get into and manage. The capital needed to purchase a property is huge.
Then there’s also the cost of ensuring your property is in tip-top shape so you can rent it out at premium prices.
Fortunately, there are companies out there that make it easier for people to invest in the real estate market. One such company is called Roofstock.
It’s not your typical real estate crowdfunding marketplace as you won’t just lend money to real estate developers.
With this real estate investment opportunity, you are basically buying properties that have rental and/or capital appreciation opportunities.
You can also purchase shares of specific properties if you don’t have the funds to purchase an entire property. The amount of money you can possibly earn here is dependent on a lot of factors.
But is the opportunity that Roofstock offers really legitimate or is it just a scam that you need to avoid?
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Roofstock is a Legit Company that Offers Opportunities To Invest in the Real Estate Market
Roofstock is the first online real estate marketplace that is designed for people looking to invest in single-family rental homes.
Launched in 2015, the company basically provides you with an opportunity to purchase real estate rental properties without the hassle of meeting brokers and doing the leg work yourself.
All the required details are already posted and the company also provides access to research materials, analytics, and insights that you can use to help you analyze properties and make individual purchases.
Based on what I’ve seen so far about Roofstock, I can say that the opportunity that the company offers is very much legitimate.
The properties that the company post in their marketplace are really legit and they undergo a strict review process before they allow them to be posted on the site.
So you can be assured that they only allow good properties to be posted on their site and they value the trust that investors put in them.
Of course, this doesn’t mean that there aren’t any issues with the opportunity that they are offering. One of the issues you’ll have to consider is the large amount of money you’ll need for the investment.
Another is that you’re still required to do your own due diligence and not just rely on what Roofstock says. Lastly, a lot of the best deals tend to sell out quickly.
I’ll discuss these issues in more detail as we progress further in this review of Roofstock.
Who Uses Roofstock?
Roofstock is designed for two types of people with one being those who are looking to unload real estate properties that they have.
The other types are people who want to invest in the real estate market but want to avoid the hassle and legwork needed to purchase a property.
For sellers, the company offers them an opportunity to have their properties posted on the site for buyers to see.
They would just need to meet certain criteria in order for it to be posted on their marketplace. The beauty of this is that they don’t really need to do anything.
They just need to pay a marketing fee and then the company will do the rest for them, including arranging everything for a smooth transition.
For buyers, Roofstock specializes in providing you with turnkey single-family rental properties, which means the property they advertise is already fully renovated and is available for rental.
A lot of the properties posted on the company’s marketplace actually already have tenants renting them, so you won’t even have to worry about looking for people to rent your newly purchased property.
Roofstock has hundreds of properties posted in their marketplace and these properties are located in various states.
The best part is that access to the site is free, so you don’t need to pay anything to view the available properties. There will be a small fee, though, once you make a purchase.
In the next section, I’ll discuss in more detail how the process of investing in Roofstock works.
How Does Roofstock Work?
Roofstock is an online real estate marketplace, but it’s not like the usual marketplace where they just provide a platform where sellers and buyers meet and negotiate.
The company will basically act like the broker between buyers and sellers, doing all the legwork and providing the necessary information to make the transaction as smooth as possible for both parties.
Roofstock will pre-certify each property before listing them to provide you with only the best single-family rental properties for sale.
To get a property certified, it needs to meet certain criteria:
- An experienced investment property firm should perform a walkthrough inspection on the property.
- There should be an estimated cost of the necessary major and minor repairs of the property in the short and near terms.
- The Property should also have a title report and this report should have a no uninsurable encumbrances or liens and preliminary title commitments where it is applicable.
- A property floor plan is required, along with a 3D virtual tour of the said property.
- There should also be a valuation analysis of the property and market conditions in the local rental market.
- Photos of the property are also required.
- Lastly, there should be a review of the summary of the lease terms and a review of the summary of the tenant selection process.
Once the property meets all the requirements, the company will certify it and allow it to be listed on their marketplace.
Roofstock will recommend the selling price for the said property, but the seller is still the one that will determine the list price that the property will sell for.
It is important to note, though, that the company will not list the property if they deem that the price is not appropriate for the property.
The beauty of this opportunity is that many of the single-family rental properties that they are selling already have tenants renting them.
From the listings, you can see basic details such as how much the property is selling for, the current rents the tenants are paying, the cap rate, the rating of the neighborhood, and the total return after 5 years.
If you click the property, more information about the property is provided, including photos, floor plan, a 3D virtual tour, and other vital details you may need.
Signing up to the company is easy and free to do so. You only need to pay a fee once you have made a purchase. Sellers will pay a fee of 2.5%, while buyers pay a 0.5% fee per purchase.
Once you see a property you like, someone from Roofstock will contact you to discuss the next steps to be taken and to answer any questions or inquiries you might have.
If you are an accredited investor, the company also has Roofstock One, where you can purchase a share of a property. One share represents 1/10th of the property’s equity.
As a shareholder, you’ll get economic rights of the said property, including possible net rental income. And you won’t have to worry about maintenance since the company will take care of it.
What Are People Saying about Roofstock?
When it comes to people’s comments and reviews about this opportunity, mostly all of them are positive. People rave about what the company is offering and says it made investing in real estate much easier.
Of course, this doesn’t mean there aren’t any issues with this opportunity. The first major hurdle you’ll likely encounter is the large capital required for this type of investment.
Not only will you need a huge amount of money for the down payment, but you’ll also need large reserve funds for possible repairs and to keep the property in tip-top shape.
The cost of repairs of the house will likely fall on you, even if you hire a property manager. So you need to be financially prepared for this as well.
Another issue about Roofstock is that a lot of the best deals they offer tend to sell out quickly. So you need to be fast in finding and scooping up the best deals.
The last issue is that you are still required to do your own due diligence on the property, especially if you are new to real estate investing.
Despite Roofstock’s best efforts to provide all of the important information to the buyers, there will likely be some information that they will miss out.
I read about the experience of one buyer who purchased a property that had an undisclosed full roof replacement on it.
This made the situation tricky for her and she wound up selling the property after only owning it for 1.5 years which resulted in a loss for her.
Though this is only 1 example that I could find, it’s still a big consideration, especially as the amount of money you need for this type of investment is huge.
What I Like about Roofstock
Now that we know what Roofstock is and what they offer, it’s time to discuss what I like about this opportunity.
- The first thing that I like about Roofstock is that membership is free. You don’t need to pay for any sort of fee to be a member and view the different properties the company has listed. As an investor, you’ll only pay a fee once you have purchased a property.
- I also like that you don’t have to be an accredited investor to purchase a property that Roofstock is listing. So even if you are new to the real estate market, you can purchase any property you like that the company has listed.
- Another thing that I like about Roofstock is the low commission and fees that they charge. As a seller, you only need to pay 2.5% to the company, while buyers will only need to pay 0.5%. This is really low compared to the standard rate that you would usually pay to real estate agents.
- It’s also good that Roofstock provides the majority of important information you need to know about a property. This lessens the research and leg work that you need to do. The process of making a purchase is also easier as the company will arrange almost everything for you.
What I Dislike about Roofstock
Of course, not everything about Roofstock is good, as there is one thing about this opportunity that I don’t really like.
- The only thing that I don’t like about Roofstock is that they cannot really provide you all of the information. As much as the company tries to put a lot of restrictions on the kind of property that is allowed to list on their marketplace, there will still be listed properties that will have issues. This means you will still be required to do your research about a property and probably ask for professional help if you are a newbie. There are a lot of things that you need to consider, so as a new investor it’s advisable to have professionals help you out.
Do I Recommend Roofstock?
After learning more about Roofstock and what they can really bring to the table, I would say that this is an opportunity that is worth checking out.
I really like that the company makes investing in the real estate market easy and simple for everyone, especially newbies.
So this will be a big help to people who want to purchase a property but don’t know where to start. Of course, you’ll still be required to do your own research as the company can’t cover everything.
Don’t hesitate to seek professional help as well, especially if you are new to real estate investing. There are just too many things to consider when it comes to buying a property.
And with the amount of money you’ll likely spend, it’s important that you still get assistance from credible professionals.