Savvy stock market investors know that transaction fees can kill market gains.
Thankfully, technology has brought transaction costs close to zero for most stock market investors. Unfortunately, real estate investors haven’t had the same luck.
Over the course of five years, I’ve purchased three rental properties (and sold one). My average selling cost for each of these was $4,000. Plus, as a buyer I paid hundreds for inspection fees and due diligence fees.
As far as I know, the only company successfully lowering prices for rental real estate investors is Roofstock.com. Roofstock is an online marketplace for tenant-occupied real estate. Looking to become a real estate investor? Here's why you might want to consider looking for properties on Roofstock.
- Easily invest in single family rental properties
- Purchase individual homes or invest in portfolios of properties
- Low fees compared to typical real estate agent commissions
Direct Ownership and REITs
What Is Roofstock?
Roofstock is an online marketplace that features several hundred tenant-occupied houses. All properties on the site are single family homes. The listings include complete inspections, 3D Models, photos and more.
In addition to the Roofstock Marketplace, the company also offer REIT investments to accredited investors through its Roofstock One platform. Since launching in 2015, Roofstock has surpassed $4 billion in transaction volume.
What Does It Offer?
Here's a closer look at some of Roofstock's key features and services.
How much does it cost to start looking at these properties? Nothing. If you find a property you like, you can read the full inspection report, talk with an advisor, and mull it over.
When you’re ready, you can buy the house by paying the 0.5% fee using your credit card (that’s right, your credit card). Once you complete your financing (or you wire the cash), the house becomes yours. Sellers get a great deal too, paying just a 3% listing fee.
It’s hard to emphasize just how revolutionary this cost cutting is. Companies like Fundrise and CrowdStreet have made it cheap to gain real estate exposure, but not to directly own individual real assets. Roofstock actually cut the largest barrier to entry for real estate investors.
Start Collecting Rents Right Away
Once you close on the home, you start collecting rent right away. This is because you assume the contract from the previous owner. The hardest part of owning real estate is finding great tenants.
If you can buy a place that already has tenants with a track-record of paying in place, it’s like buying a gold mine. Roofstock makes that happen.
Roofstock's "Lease Up Guarantee" provides security for vacant home purchases as well. With this guarantee, Roofstock pledges to cover your rent for up to a year if a lease hasn't been signed on your "rent-ready" home within 45 days. Be sure to check out the details of the guarantee here to get the specifics of what "rent-ready" means.
Another reason to consider Roofstock is its thorough inspections. The inspections cover the actual quality of the house, the estimated repair costs, and the financial figures you need. It’s truly possible to buy a house site unseen through Roofstock.
Of course, you can fly out and view the houses yourself too. I think most people will want to start their roofstock investments in a relatively local market.
Driving a few hours to visit several houses makes sense to me. But some people buy the houses site unseen. The thorough inspections make that a reasonable (if risky) option.
One of the hardest part about buying single-family rental properties is often finding the financing. But Roofstock has an integrated financing solution for people with qualifying credit and at least 20% down.
If you’re a serious buyer, compare Roofstock’s loan offer to an offer from LendingTree.com to see if you can get a better deal. According to Roofstock, its in-house financing solution allows buyers to close in as little as 30 days. It might not be the absolute best interest rate, but it's amazingly fast.
Use As Much Or As Little Of The Platform As You Want
One of the best things about Roofstock is how open the platform is. You can buy tenant-occupied real estate, with Roofstock partner financing, and use Roofstock’s property manager.
On the other hand, you can find a buyer’s agent, pay for your own inspection, find your own financing, and manage the property yourself.
This is an incredibly important point to consider. If you’ve got a property management system in place, you don’t have to pay for a Roofstock property manager. If you’re a new investor, you may appreciate the hand-holding.
Before you buy, make an independent evaluation if real estate investment is for you. If it is, is just one tool. You should also look for houses in your local market, and study resources at sites like before making the plunge.
Roofstock One is completely different from Roofstock Marketplace. First of all, it's only open to accredited investors. Second of all, it allow investors to invest in portfolios of single-family properties. This is similar to other real estate crowdfunding sites.
Getting started with Roofstock One requires a minimum investment of $5,000. Roofstock handles everything from there, including the management of all the homes that are included in its Roofstock One portfolios. This means it could be a great option for investors who want a more hands-off real estate investing approach or who would like exposure to a broader diversification of properties.
But it's important to note that Roofstock One investments are highly illiquid. Investors are required to have an investment horizon of at least 5 years and there is currently no secondary market for selling Roofstock One shares.
Roofstock recently launched their Roofstock Academy, where you can learn how to master turn key rental properties. This course goes well with actually using their platform for purchasing property.
The Roofstock Academy combines online learning with one-on-one coaching session and access to a private network of other real estate investors.
Are There Any Fees?
Yes, there are costs for using the Roofstock Marketplace as well as Roofstock One. Here's how they break down.
Buyers pay a marketplace fee of 0.5% or $500 (whichever is greater) and sellers pay a 3% listing fee or $2,500 (which is greater). That means the total commission is much lower than the average commission of real estate agents of around 5%-6%. If you decide to use one of Roofstock's vetted property managers, their fees will vary by region, but the average is about 10% of the monthly rent.
Roofstock is being curiously quiet about the costs of Roofstock One. In fact, it doesn't mention fees anywhere on the Roofstock One homepage or in the FAQs. From what we've been able to find online, it appears that Roofstock One investors are charged an asset management fee that starts at 0.50% of the home price but will adjust at the same rate as the gross rent changes.
How Does Roofstock Compare?
There are few companies out there that can match what Roofstock offers. Yes, there are plenty of real estate crowdfunding sites like Fundrise that will allow you to invest in non-traded REITs, but most don't offer individual property investments.
Doorvest's business model is similar to Roofstock in that it allows you to buy single-families homes outright. But the biggest difference is that the homes that are available on Doorvest won't typically have renters living there and may need renovations.
Once you've chosen your perfect property on the Doorvest platform and made your refundable deposit, Doorvest will buy the home on your behalf, renovate it, and find a tenant. Then after all of those steps have been completed, you'll close on the home at the Fair Market Value and begin earning passive income. Doorvest does not offer any REIT investments.
Realty Mogul is similar to Roofstock in that it allows investors to invest in both individual properties and REITs. But while Roofstock's platform focuses on single-family homes, all of Realty Mogul's offerings are commercial properties. Here's a closer look at how Roofstock compares:
Individual single-family properties
REITs of single-family properties
REITs that include a blend of residential and commercial properties
Individual commercial properties
REITs of commercial properties
Open To Non-Accredited Investors?
Non-accredited investors can buy individual properties on the Roofstock Marketplace, but can't invest in Roofstock One shares
Non-accredited investors can invest in REITs but not individual properties
How Do Get Started With Roofstock?
You can start browsing properties on Roofstock anonymously. But if you try to click on any specific home to see more pictures and financial details, you'll be asked to create an account.
Thankfully, that's easy to do. You can choose to login instantly with your Facebook or Google account. Or you can create a separate account by providing your name, phone number, email address, and a password.
Is It Safe And Secure?
For an online home-buying platform, Roofstock is about as safe as it can get. It's website is encrypted and it provides loads of data about each property to help you make an informed decision. Plus, it even offers a 30-Day Money Back guarantee. You can learn the specifics of its home-buyer guarantee here.
How Do I Contact Roofstock?
If you have questions about the Roofstock platform or need assistance, you can call 800-466-4116
or email email@example.com. You can also send a message through the company's contact form here.
Is It Worth It?
In my opinion, Roofstock is the low cost brokerage of the real-estate investing world. I expect that copycat competitors may soon hit the market.
If you're curious about how the market works, check out our interview with Roofstock on turnkey real estate investing.
At that point, we will have to weigh the costs and benefits of various features. But right now, Roofstock is in a league of its own. Check out the houses. It’s free to browse.
Here are the answers to a few of the most common questions that people ask about Roofstock:
Who is the CEO of Roofstock?
The CEO of Roofstock is Gary Beasley, one of the company's co-founders.
Is Roofstock publicly-traded?
No, it's a private company and Roofstock One is a private placement REIT.
Can you buy newly-built homes on Roofstock?
Yes, newly-constructed Lennar homes in select regions can be purchased on the platform.
Does Roofstock have an app?
There's no mobile app for the Roofstock Marketplace. But if you've already purchased a rental property on the platform, you can track its financials using the Roofsavvy iOS app.
Taxable or self-directed IRA via Roofstock's partnership with New Direction Trust Company
Direct Ownership and REITs
Money Back Guarantee
Lease Up Guarantee
If vacant homes haven't been leased within 45 days of purchase, Roofstock will cover rent for up to a year.
Roofstock Marketplace Fees
Roofstock One Management Fee
Starts at 0.50% but may adjust with the property's gross rents
High -- fund financials are filed publicly with the SEC
Investment Term For Roofstock One Shares
At least 5 years
Roofstock One Share Redemption Program
Customer Service Phone Number
Customer Service Email Address
Mobile App Availability
iOS and Android
Commission and Fees
Ease of Use
Roofstock allows investors to buy turnkey single-family homes with ease, all done online.
- Buy single-family homes online
- Lower commissions for home sellers
- Roofstock One offers REIT investments for accredited investors
- Hazy fee structure for Roofstock One
- Real estate is an illiquid investment
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.
Editor: Clint Proctor