Buying rental property can get you a great return on your money. But did you know that owning rental property doesn’t have to include 4 a.m. calls from your tenants saying the furnace quit working?
It’s true! There is a better way, where getting started in real estate includes a certified property manager with experience in the local area.
There is a company that is making this process easy and it goes by the name Roofstock. The company specializes in single-family rentals, and they’re the first to offer an online marketplace to start and advance your journey of rental property ownership.
Buying a rental home online might sound like a crazy idea, but Roofstock makes it easy and worry-free. If you want to become a real estate investor without the hassle of fixing toilets, Roofstock might be the answer you’re looking for.
What is Roofstock?
Roofstock helps investors buy rental properties. The online marketplace lists hundreds of single-family homes available for purchase. You can pick from managed investments starting at $5,000 or buy larger multi-million-dollar portfolios.
How much you invest depends on where you’re at financially. To help narrow your search, the filters in Roofstock’s marketplace let you view homes by location, price, rent, and percentage yield.
One feature that sets Roofstock apart is its turnkey approach to rental properties. By offering a property management team that takes care of the tenants and day-to-day management, you get a made-for-you solution to real estate investment.
How Does Roofstock Work?
Unlike Fundrise, EquityMultiple, or other passive real estate investment opportunities, Roofstock is not crowdfunded real estate. With Roofstock, you’re buying the property outright and have complete ownership of the home.
It offers an easier path to real estate investing than what you might expect. The process is more passive than the usual route of finding an agent, driving around town to look at multiple properties, manually researching information about the home, and analyzing all the documents.
Instead, Roofstock does the groundwork for you. It’s a full solution to turnkey rental properties.
The platform provides research, analytics, and insights to help you pick the best home to buy. Whether you’re getting started in real estate, or you’re a seasoned pro, you’ll want to review:
- Photographs, floor plans, and virtual tours
- Information about the current tenants including payment history
- Property inspection and valuation reports
- Insurance estimates and tools to project your return
- Ratings for the neighborhood and local schools
If you’re looking to buy real estate, Roofstock gives you everything you need to make an informed decision.
Your property can deliver cash flow from day one because the rentals already have tenants who meet Roofstock’s strict screening guidelines. That means busy professionals can invest without worrying about the time commitment or any repairs you might need to do.
How to Invest with Roofstock
Roofstock has investment options if you’re just starting to get your feet wet or want to build a significant portfolio of rental properties. That’s part of what makes it so great: No matter what price point you’re at, you can get in on single-family rental homes.
Roofstock lets you invest at three different levels:
- Single-family rental properties
- Single-family and multi-family portfolios
- Fractional ownership shares in a property
Which type you go with depends on how much money you have available to invest.
Single-family rental properties
Roofstock has a focus on single-family rental homes. The marketplace has over 500 listings ranging in price from about $40,000 to over $400,000.
Each listing has photographs of the inside and outside of the property, including a “curb view” that shows what the neighborhood looks like from the street. You’ll also see how much the property costs, what your estimated return is, and be able to download property valuations, title reports, and other essential documents.
Single-family and multi-family portfolios
It might not look like Roofstock has many portfolios available when compared to individual rental properties. The selection is quite large when you consider each portfolio includes multiple homes, combined together in a single package.
If you have the cash available, a portfolio is a great way to go. The listings are made up of groups of properties and have a minimum purchase requirement.
For instance, one option might require you to purchase at least three of the four single-family homes included in that listing. Larger portfolios can have over 100 homes, and you may need to buy all of them at once.
Another thing that sets portfolios apart from Roofstock properties is that portfolios are more likely to include multi-family rentals, while properties are primarily single-family residences.
Fractional ownership shares in property
If you’re not ready to put down tens of thousands (or millions!) of dollars, but still want to invest in real estate, consider buying shares of ownership with Roofstock One. This option has a lower barrier to entry since you can start with just $5,000.
Roofstock One calculates your income on the percentage of ownership you have in the individual property.
Buying shares of a rental home has all the same benefits as buying a full unit. The property management partners will take care of the day-to-day operations so you can enjoy your passive investment.
How Much Money Do You Need?
How much cash you need depends on your investment goals. For example, investors who plan to purchase a home with cash will require 100% of the funds upfront, plus additional money for closing costs.
Taking out a mortgage is common when buying a home. When financing your primary residence, you may find loan options that require a down payment from 0% to 5%. The financing options are different if you’re buying a rental property. You generally need 20% to 30% of the purchase price for a down payment, which can take a little while to save up for.
As for the costs, they’re pretty reasonable. Reviewing listings in Roofstock’s online marketplace doesn’t cost anything. The property valuation, title reports, and other documents don’t cost anything, either.
Once you find a rental home to buy, you can make an offer without paying anything. Roofstock charges a marketplace fee if your offer is accepted. You’ll either pay 0.5% of the purchase price or $500, whichever is higher.
Property manager fees
You also must pay the property manager for their services. The costs vary depending on which one you choose but can range from 6% to 10% of the collected rent. That means if the monthly rent is $1,750, your fee will fall between $105 and $175 each month.
Roofstock can help you save money on property management costs. The company works with preferred partners to negotiate lower fees, and you’ll likely pay 8% or less.
Related Interview: How I Bought 20 Rental Properties in Cash – with Rich Carey
Other costs to consider
Keep in mind that you must have insurance on the home, pay property and city taxes, and cover the cost of repairs. Depending on the location of your property and your rental agreement, you may also have to pay for some utilities and home-owners association (HOA) fees.
Are There Any Guarantees?
Buying a rental property can feel risky. Roofstock offers two guarantees to make sure you’re confident in your investment:
- A 30-day money-back guarantee
- Guaranteed rental income
If you’re not happy with your rental purchase, let Roofstock know within 30 days. They will re-list your property at no cost to you and refund what you paid for it, even if the home sells for less money.
If your house doesn’t sell, the company will buy back your property themselves if it’s still on the market after 90 days.
Roofstock also guarantees rental income. Most of the homes come with tenants already living in them, which means you can collect rent right away. If your rental is empty and stays empty for 45 days, the company will pay you rent. Your earning potential is pretty much guaranteed when you buy with Roofstock.
Is Roofstock Right for You?
Roofstock makes buying investment property easy for anyone. No matter where you live, they give you the information, access, and support you need to purchase rental homes with confidence.
The company partners with lenders, insurance providers, and property managers to take you through the entire process of buying a home.
But it isn’t for everyone. There are a few downsides:
- Buying property online can be risky. Roofstock does a great job of providing you with photos and inspection reports to help you make an informed decision. Since you won’t see the home in person, your entire investment relies on how well you review the documentation. If you don’t catch something right away, you might not be able to go back and make a different decision.
- Requires a large down payment. Rental real estate isn’t your average investment. You’re buying a house, and that means you need a lot of money upfront. Even if you finance your purchase with a mortgage, you typically need a down payment of 20% to 30% plus closing costs.
- Repairs can be costly. Refrigerators can stop working, pipes can leak, and mother nature can wreak havoc on your property. To cover all of the repairs, make sure you have enough cash set aside to pay for emergency repairs and expenses.
- You’re in it for the long haul. Unlike some other investments, you can’t change your mind and liquidate your account. You bought a house, and mortgages usually last 10 to 15 to 30 years. Unless you sell the rental home, you won’t be able to access your investment cash.
Roofstock Review: Final Thoughts
If you’re in the market to buy a rental, Roofstock is a great place to look. Be sure to do your homework when researching the property because the entire process happens online. You won’t be walking through the property or driving through the neighborhoods.
The company will do a complete analysis and have all the information available to help you make the right decision.
Roofstock’s selection of turnkey rental properties can fit any budget. If you find a good investment property, you can register and submit an offer for free.
Our Interview with Roofstock
To go even deeper and see if Roofstock is right for you, watch our interview with Zach Evanish from Roofstock.
Andy had a chance to ask him specific questions on how the process works and why it might be a good fit for busy parents who still want to be investors.
Check out Roofstock today and see if it's right for you.