Roofstock Property Purchase: A Quick Summary of Roofstock's Site
As mentioned in my last post, I have decided to give Roofstock a try. They provide access to investment opportunities that instantly provide cash flow through rent; in other words, they already have tenants or have rent guarantees (see below).
Roofstock's goal is to provide an amazon.com-like experience for real estate. When first exploring their website, it feels almost scam-ish. Roofstock makes it so easy to start making offers on homes, that it feels like it can't be legit. However, after getting past this, it is clear to see they provide some very useful tools to start selecting properties.
I want to quickly go over some of the interesting aspects of the site. They provide a list of properties with a picture, price, return over 5 years, and neighborhood type. They use a star rating system for neighborhoods instead of your typical A/B/C/D class type. This is kind of annoying, but easy to figure out:
1 & 2 stars = C and below
3 stars = B
4 stars = either B or A
5 stars = A
Here is a look at the property market:
Types of Guarantees
Here is a summary of the different guarantees Roofstock offers on their properties:
These properties are pretty cool. Roofstock guarantees 90% of the market rent until the unit(s) are filled! These can be great opportunities. If you can find a property that you can add some forced appreciation to (classic fix up), you can also collect rent along the way. Too good to be true, right?!
In practice I've found that most of these properties do not really have many features that would be financially worth fixing, and the cash on cash for the guaranteed rent properties has not met my standards yet. I always keep an eye out for these properties, but I think it would be very rare to find one that satisfies my criteria and it would go very quickly. It seems that there are more cash flowing opportunities outside of this category.
Roofstock has certified these properties through their own inspection process. These properties are generally the best from an investment perspective, but they go quickly. Roofstock has already had them inspected and approved to their standards. There are no inspection contingencies here, however, so be careful of that. With these properties, you basically come to an agreement on the price, get it appraised (you'll still have that contingency), and close.
These properties are not Roofstock certified, so you'll have to get your inspection during closing (this is the type I originally went for). They are a little more "risky" in that sense, so it is easier to find better deals on these types of properties. You still have the inspection as a way out of the deal if needed. Although not certified, these properties still seem to be in reasonably good shape.
When you click on a property, you can see an estimate of all of the financials. Roofstock provides built in calculators as well, with fairly realistic numbers. This is super helpful for a new and time-limited investor and is one of my favorite things about the site. They also allow you to adjust certain expenses to hone in on what you believe are more accurate numbers for your circumstances.
Here is a look at the calculator, you can see the sliders that allow you to adjust assumptions: