Whether you’re already committed to real estate investing or you’re just dipping your toes into what to do with your wealth, you’ve probably heard of Roofstock. (They’re a real estate marketplace specializing in turnkey rentals.) And before you start throwing your money at them, you need a Roofstock review.
As a real estate investor with 9 rental properties, my recommendation is this: (Yep, I’m giving you the TL;DR at the beginning this time!)
Roofstock review TL;DR
I recommend signing up for free even if you’re not sure about investing in real estate yet, because it’s a great tool to:
- Choose an area and learn what kind of numbers to expect
- Keep tabs on properties
- Enter the learning curve of buying real estate
Once you have an account, understand rentals, and have chosen an area – it’s up to you. You can go with Roofstock, but I’d probably get an agent to find an even better deal.
Read the full Roofstock review to learn what’s worth it and what’s not!
Roofstock is just a tool in a toolkit
You know how when you’re about to buy a new pair of headphones you go on Amazon, you read all the reviews, you check all the similar headphones, you make a chart of pros and cons, and then you price-compare online and at local stores?
(Just me?)
Having a Roofstock account lets you do that, but with rental properties. You can price-compare, you can keep tabs, you can even look for deals. Seriously, it’s like eBay for houses, but better organized. I actually check in regularly just for fun. And it’s free!
But remember it’s just one tool! I’d never buy an expensive pair of headphones without “triangulating” my research, and I’d never buy into an area with info from just one site! Roofstock can help you with the learning curve, but the onus is on you to be informed. Use MLS, an agent, and any other contacts you build in that area to make a sound real estate investment.
More about how to do that at the bottom of this Roofstock review.
Roofstock: The pros
I will give them that they really made it a one-stop shop for both buyers and sellers. A lot of these pros would be tempting if I was brand new to real estate, but they come with some fine print. In this Roofstock review I want you to understand the pros, the cons, and how to make the best of both.
Signing up is free and it starts your learning curve.
This is my favorite part of Roofstock. Just by signing up for an account I can start doing the research for where I’ll buy my next rental property.
Roofstock specializes in rentals.
They deal exclusively with single-family rental homes and turnkey properties, so you’re not sifting through MLS looking for gems. You only look at turnkey homes, knowing whether they already have a tenant, and they provide all the relevant data like expected rent income.
They have lower closing fees.
A typical home sale will cost the seller 6%. With Roofstock’s transactions, the seller pays 2.5% and the buyer pays 0.5% or $500 – whichever is higher.
They have “preferred managers”
I don’t know if this is a pro or a con for you, but there’s something to be said about having a “one-stop-shop” for all your rental needs.
On the same token, don’t skip on your due-diligence and go with the first person they recommend. Make sure you vet EVERYONE you’ll be working with. Especially your managers!
Roofstock’s certification process
Whether you buy through Roofstock or not, I’d still recommend having your own inspector go through. However, it is nice that there’s a certain vetting process for properties before they even go on the market.
Prior to accepting a listing, Roofstock has a third-party inspector review the property to check that the home does not need any major immediate repairs, and has the seller “confirm” that there are no excessive late payments owed by tenants.
A full overview of what to expect through the Roofstock certification process is here.
Roofstock’s guarantees and protections.
Roofstock also offers some guarantees that make it tempting to buy from them. I will say though, that you don’t actually need these once you have some experience.
The money-back guarantee (30 days)
It’s almost like returning a T-shirt after having some buyer’s remorse – but on a much grander scale.
In essence, if you’re not happy with your purchase within the first 30-days, Roofstock will let you re-list with them for free, and you will get your original purchase price back regardless whether it sells for more or less. If you can’t sell within 180 days, Roofstock will buy the property from you. That said, you’re still responsible for any costs you incur while the home is under your name, as well as any additional closing costs.
Why you don’t need it:
I need you to know that you never have to buy a house until inspections pass your standards anyways! I’ve bought a number of houses – including some sketchy ones – and I’ve never had buyer’s remorse.
The key here is to use an inspector you trust, and be assertive that you won’t close until everything’s fixed up.
I remember holding a purchase back one month because the turnkey seller didn’t fix up the bathroom properly. It took 2 attempts, and 2 inspector visits before the repair was good enough for my standards. My thinking – if I’m buying a turnkey, I’m not doing any repairs. Period.
Maybe if I wasn’t willing to be pushy, that guarantee would have been nice, but if you’re willing to get pushed around, real estate may not be for you.
The lease-up guarantee (45 days)
This is kind of nice. I’m sure if you’re a first-time buyer your first question is “what if it doesn’t rent?!” so this might give you some peace of mind.
If you haven’t found a tenant for at least 90% of the market value within 45 days of the home being “rent-ready”, Roofstock will pay you 75% of the market rate for up to a year.
It only works if you buy the property vacant, and work with a “preferred” property manager.
This has actually happened to me. I bought one house with no “rent guarantee” and it didn’t rent for 6 months! AHHHHH! Oh well. It’s my most-profitable property now.
Why it’s not essential.
You should be buying houses in areas with strong rental markets that will get filled quickly. This requires more extensive research, and this is where dealing with an agent specialized in that area will come in handy. (But I do get that things do happen, so this is a nice little protection.)
You should also know that you can negotiate a “rent guarantee” with the seller. I’ve done this for every house I bought (except the one I just mentioned 😉 )
Roofstock: The cons
If you follow my recommendation, and sign up for Roofstock as a free tool in your toolkit to get to know an area and the numbers, there are absolutely no downsides. However, before you get swooped off your feet, consider the following:
Their prices are marked up.
If you’re going to give a comprehensive service with low commission rates, there’s likely a catch. That catch comes in the form of higher home values. Actually, I know this for sure because I keep up-to-date with MLS listings. If you double-check with an agent about what’s reasonable, you should be okay though.
Their data is one-sided.
If you’re solely relying on data from Roofstock, you might forget to do your own due diligence. There may be state-specific rules that Roofstock didn’t look into, or maybe there’s a neighborhood rental trend you haven’t caught onto yet. Erring on the side of caution and doing extra research is super-important when buying a house!
Even Roofstock’s guarantees are not fool-proof!
For example, the “lease up” guarantee can only be granted if you use their approved agents, and even the 30-day money back could end up losing you money. (Read about Roofstock’s guarantees.)
My recommendation knowing what I know now
I would definitely recommend signing up for an account with Roofstock especially if you’re nowhere close to being ready to buy. It’s free, it will give you access to a wide database of rentals, and it will get you familiar with what to expect from buying an investment property.
Once you have an account, use it to get to know different areas. Keep an eye out for:
- Typical prices in an area, if there’s an outlier and what’s special about it
- Rent to Price ratios
- What types of homes seem to sell really fast
- What types of homes pop back onto Roofstock (meaning they’re using the buy-back guarantee)
- Compare these homes to similar ones on MLS for a price reference
Once you learn what to expect, find a realtor in that area. You can do a google search, use Linkedin, or just ask around until you find someone with stellar recommendations.
A realtor will give you a more realistic rundown of the numbers, will be more candid about which areas are good and which are no-bueno, and will likely find a much better deal for you. Bonus points if they’re also a property manager, and can recommend a well-priced handyman and a good inspector.
(Note: having a good team is crucial if you’re buying a long-distance property investment, so take your time to do proper vetting – especially of the property manager!)
But again, if you’re not ready to start making deals with an agent, that’s totally fine! Just start keeping tabs on what buying a property is like by signing up for a free account with Roofstock.
TL;DR Roofstock review
- Sign up for free to get to know different areas and the numbers – but “triangulate” your research with a realtor once you choose where you want to buy
- There are many pros to buying with them – mainly around their guarantees – but you can get the same benefits on your own with a little experience
- The cons are that their prices are marked up compared to what you’d get with a realtor, and that if you skip your due-diligence you might get screwed.
- Personally, I use them as part of my research, but plan on buying through an agent.
After reading this Roofstock review, you have no reason not to sign up (for free!) Do it here!
More reading:
How to get into rental investing
Crowdfunded real estate investment – all the gains none of the work! With top eREIT recommendations!
FAQ about Roofstock
Is Roofstock a good investment?
Investing in rental properties is generally considered a good investment. Purchasing through Roofstock has some pros – like their protections and certification process, and cons – like higher prices. Roofstock’s free account can be used as a research tool for real estate investing.
Is Roofstock safe?
Roofstock offers protections, like a money back guarantee if you’re not happy with the home, or the lease up guarantee if you can’t find tenants. They also put the home through a strict certification process prior to listing. These protections take some risk away from the investment, however the onus is still on the buyer to do their due diligence.
How does Roofstock make money?
Roofstock earns a 3% commission on closing costs. The seller pays 2.5% and the buyer pays 0.5% or $500 (whichever is higher.) This is lower than the typical 6% closing costs, however experienced real estate investors report that Roofstock prices are considerably marked up compared to market value.
Is Roofstock publicly traded?
No. Instead of buying Roofstock shares, you can create an account and purchase a turnkey rental. You can also invest through Roofstock One which lets some investors “buy” one tenth of a home.
In what states does Roofstock operate?
Roofstock currently operates in: Alabama, Arizona, Arkansas, California, Delaware, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Michigan, Mississippi, Missouri, Nevada, New Jersey, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Wisconsin.
