Roofstock Review: Is This The Best Real Estate Investment Platform?
How does this real estate investing platform stack up against the others?
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Roofstock is a real estate investing platform that specializes in turnkey single-family rental properties. Using Roofstock, investors can buy properties—with just a small fee paid on properties they purchase—that already have tenants, so they can start earning a return on their investment right away.
While Roofstock is not like many other real estate crowdfunding platforms, it does have several distinct advantages. For one thing, investors who buy properties through Roofstock can get direct interest—indeed, full ownership—in the properties they purchase.
Also, Roofstock’s online marketplace provides a great deal of information about every property listed for sale, including rental income information. Most other platforms are not nearly as transparent.
What is Roofstock?
Roofstock is an online real estate investing platform that was launched in 2015 and is headquartered in Oakland, California. The company’s goal is to disrupt the real estate industry by making it much easier for real estate investors to find, vet, and purchase single-family rental properties.
Unlike other investing platforms, Roofstock is known almost entirely for selling direct interest in single-family rentals. The company does not offer REITs or other alternative investment products, nor does it market properties designed for flippers.
Instead, Roofstock is a platform specifically focused on buying and selling single-family residential properties (and portfolios) that are already rented and producing income.
The one other investment option available through Roofstock—called Roofstock One—allows users to invest as little as $5,000 to buy a partial interest in single-family rentals.
How Roofstock works
Roofstock is a mostly-open platform that allows users to search properties listed in their marketplace without even registering. However, once a new user creates an account, additional information is available about properties available for sale.
If an investor finds a property they like through Roofstock, they can purchase the property completely online (Roofstock even has partners that can help with financing). The only fee that Roofstock charges for helping investors find and purchase rentals is a surcharge of 0.5% of the purchase price (minimum $500).
Roofstock’s deal process
In addition to working with Roofstock as a buyer, users can also sell single-family rental properties through the platform. And, while the process for buying properties through Roofstock is relatively simple, the steps for selling through Roofstock are only slightly more involved.
Unlike other real estate investing platforms, the deals available through Roofstock are largely open-source. When someone wants to sell a property, they can list it directly on Roofstock’s marketplace, with Roofstock gathering information on the property including the address, the state of the home, and info on the tenants (rent, duration of the lease, etc.).
Once a property is added to Roofstock’s marketplace, users can view information about the property for free. There aren’t any fees until a property actually sells—with a 0.5% fee due from buyers and a 3% commission due from sellers.
And, for investors who own portfolios of properties, Roofstock has a process for users who want to sell an entire portfolio all at once—though they may have to take a hit on the sales price in exchange for selling many properties all at once.
The biggest thing that Roofstock is known for is its marketplace. However, the company also has two other principal offerings:
- Roofstock One - Let’s users invest as little as $5,000 to buy a partial interest in investment properties
- Platform Services - Helps users manage their properties by matching them with knowledgeable local managers
Typical cost and returns
There is no cost to sign up for Roofstock’s marketplace, nor is there a monthly fee. Users who purchase a property through Roofstock pay a small fee at closing, equal to 0.5% of purchase price or $500, whichever is greater.
Additionally, users who sell properties through Roofstock are charged a 3% selling fee, though this is less than the commissions charged by most real estate agents.
While Roofstock doesn’t charge monthly fees to investors who purchase entire properties through its marketplace, investors who use Roofstock One to purchase a partial interest in properties are charged an annual management fee of 0.5%, assessed quarterly.
Information on the average returns for Roofstock investors is not immediately available, but individual cap rates are available on each property’s listing.
Roofstock’s core offerings are relatively simple and straightforward, but one of the great things about Roofstock is the amount of additional value the company can offer investors—in part because of its simple selling structure.
For one thing, Roofstock’s option of purchasing a direct interest in properties through its marketplace makes Roofstock a great option for investors who want to complete a 1031 exchange in order to defer taxes on gains from the sale of properties.
Owning direct interest in properties also makes it possible to invest through Roofstock using an IRA—though this involves setting up a self-directed IRA with a third-party provider (New Direction Trust Company) that Rofostock has partnered with. This will also require extra fees.
Roofstock’s biggest value adds, though, are for management and financing. For investors who purchase properties through Roofstock, the platform can help them connect with reputable local managers who can help collect rent, handle maintenance requests, and market properties if tenants decide to move out.
And, for investors who want to finance their investments through Roofstock, the company has relationships with two different financing partners (Agora and Better.com) that can provide a number of different financing options.
In addition to these great benefits, Roofstock also has Roofstock Academy, which is a great resource for users who want to learn more about real estate investing. And, the company offers a 30-day satisfaction guarantee for users who purchase properties through their marketplace. If you aren’t happy with your investment, Roofstock will let you resell the property for free, or even purchase it directly from you so you can get your money back.
Pros & cons of Roofstock
- Next to no buyer fees
- Investors own a direct interest in real estate
- No annual holding charges
- 30-day guarantee
- Excellent reviews online
- High minimum cost of investment (unless you invest in fractional ownership)
- Financing isn’t available directly through the platform
- Roofstock doesn’t manage properties
- No crowdfunding option (unless you invest through Roofstock One)
Who should use Roofstock
Roofstock is a great option for people who have experience investing in real estate and are comfortable buying rental properties in areas outside where they live that can be managed by professional managers. Additionally, investors who use Roofstock should typically have $20,000 or more to invest, so they have enough for a down payment and closing costs on a typical rental listed on the platform.
The ideal Roofstock user is:
- An experienced real estate investor
- Wanting to focus on single-family residential properties
- Comfortable buying without viewing in person
- Willing to use independent managers
- Someone with at least $20,000 to $30,0000 to invest
- A person with a net worth of $100,000 or more
Roofstock is a real estate investing platform that specializes in helping investors find turnkey single-family residential rental properties that already have tenants and are already producing rental income. But, this option isn’t for everyone. Investors who want to focus on commercial real estate, for example, will not find many options on Roofstock, nor will those who prefer short-term vacation rentals.
If you want to learn more about different ways to invest in real estate, check out our ultimate guide to investing in real estate.
If you’re particularly interested in investing small amounts of money and getting access to deals that you might not otherwise be able to participate in, visit our guide to real estate crowdfunding.
And, as always, if you have questions or would like to share your own experiences using Roofstock or another platform, be sure to jump in the comments section below!