Advice on buying my first rental (Roofstock.com?)

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Advice on buying my first rental (Roofstock.com?)

Andy Winningham
Dallas, TX · Member since 2017 · 12 posts · 5 votes

Hey BP community! My name is Andy and I have just recently discovered the BiggerPockets podcast. I'm loving everything I'm learning and I'm excited to start getting my feet wet in the world of REI. I am curious if anyone has had any experience with Roofstock.com to purchase a rental property.

To give you insight into my thought process...right now, while I'm still trying to accumulate knowledge but still desiring to get in the game with my first rental, the idea of buying through Roofstock is very appealing to me. I like the thought of being able to lean on someone else's knowledge and expertise when it comes to finding a property, the results of the inspection, finding a tenant, managing the property, etc. and am willing to sacrifice a bit off the top to get some help in those areas. 

I would welcome thoughts/input on Roofstock in particular, and also my approach in general. Thanks y'all!

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Mushfiq S.
Seattle, WA · Member since 2016 · 249 posts · 54 votes
9y

My property is doing well from Roofstock. I made sure to pick a property that had a new roof and hvac. Also I made sure to contact the property management company prior to my purchase to make sure the area is rentable.

Roofstock does not allow an inspection during escrow. You are allowed to bring your own lender and property manager if you wish.

Roofstock was my first invesment and now I have put together a team on the ground in the same location and have purchase 3 more properties. I see Roofstock as a starting ground for beginners.

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  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    9y

    Hi Andy. I know this is a bit late, but I just saw your post. 

    I haven't worked with or bought through Roofstock to say anything for sure. But I did go on their site and had a look around. To clarify where my brain is, I've been involved with and buying turnkey rental properties for almost 6 years. Roofstock promotes properties very similar to turnkeys, although I had not shopped through them before, so when I went to check out the site....my feedback is kind of general but also in some comparison to what I know about buying through turnkey providers, since this setup is similar.

    The biggest concern I have that I read on their site is they pretty clearly tell you that you don't, and shouldn't, do any due diligence on your own...even so much as get a property inspection. Truly, if there is one piece of due diligence every investor on this planet needs to do regardless of the type of property, it's get an inspection. I appreciate that they are supposedly so thorough with their certifications that an investor doesn't need to verify everything, but any real estate investor who gets into the belief that they should just trust other people is setting themselves up for extremely high risk in my opinion. The famous phrase "trust, bu verify" doesn't exist for no reason. So, without firing off into a rant about how irresponsible I think telling any investor not to do due diligence is, this part concerned me.

    The couple smaller points I noticed were 1. you have to pay them a fee to go under contract (turnkey sellers don't do that and it puts that amount of your money at risk, and it's just not necessary), and 2. these are newly rehabbed houses like turnkeys. It looks like these were purchased previously as turnkeys, meaning the rehabs would be new and fresh, but they aren't now so that sets you up for having to deal with potential repairs and even a freshly rehabbed house needs an inspection to verify everything, much less houses that haven't been rehabbed in a while.

    Like I said, I haven't worked with them to say for sure on any of it. But those are my current turn-offs and concerns. The houses could be great, so great you don't have to do due diligence, but I'd have to do some major research into figuring out how that's possible and I'd still be irritated about paying a fee when no one else charges one (although maybe it means you get better service, I don't know).

    1Reply
  • Andy Winningham
    OP
    Dallas, TX · Member since 2017 · 12 posts · 5 votes
    9y

    Thanks @Ali Boone! That's all helpful stuff. 

    0Reply
  • Nick Yates
    Bloomfield Hills, MI · Member since 2016 · 48 posts · 12 votes
    9y

    Hi @Andy Winningham, we are new to real estate investing too and like you we have also been looking at Roofstock. We have always been impressed with their website and communication. Thanks @Ali Boone for your comments about inspection due diligence. It is the one thing that we love and hate about Roofstock. We love that an inspection report there to view straight away but hate that we would rely on it. We too would definitely argue to get an independent inspection. 

    My thing with the Roofstock process are the inflated prices. The prices sit well above any comps from any websites you want to use and they sit above the valuations that are given in the diligence vault. The standard Roofstock answer is that the market (buyer and seller) will always determine market value but I don't agree. From an inflated starting point, sellers and buyers can't negotiate the price to an acceptable price for both parties. I think the result is the large number of listings that have been sitting there for months. The other thing about this process is that you can't actually write comments or give feedback. We have put offers on Roofstock properties but none have been successful thus far. To be honest, we are prioritising forming a team to purchase investment properties and not use Roofstock. 

    Andy, which area are you looking to invest in? 

    1Reply
  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    9y

    @Nick Yates

    All good info. What kind of properties are you looking for exactly? Like what about the Roofstock properties fit the bill of what you want? Main reason I ask is because if you are in Michigan, I'd imagine you can buy locally for good cash flow without having to go through a service like this. A service like this is very similar to turnkey, and you wouldn't need to buy turnkeys (or similar) in Michigan I wouldn't think. Are you wanting to buy local, or long-distance....just wanting rent-ready properties?

    0Reply
  • Andy Winningham
    OP
    Dallas, TX · Member since 2017 · 12 posts · 5 votes
    9y

    @Nick Yates and @Ali Boone

    Appreciate the input, you guys. Nick, I suppose I haven't yet settled on an area to invest in yet. My wife and I recently bought our first home in late summer of 2016. It's in a part of Dallas where prices are still dirt cheap compared to the rest of the city but seems to have a good likelihood to appreciate over time. New restaurants and new apartments and things like that have begun to creep up in that part of the city. So initially, I was thinking we would just buy our first rental property in the same neighborhood that we live in. After all, I realize I'm no expert at this and I know our neighborhood better than I know any other one. But as I've listened to some more talk on REI, I started to have two concerns:

    a). Am I making a bet purely on some gut feeling I have that this area will appreciate substantially? Isn't that akin to speculation? 

    b). Buying a second home in our neighborhood mean a majority of our wealth is concentrated in two properties in one neighborhood. Would it be more prudent to invest somewhere else?

    So when I was turned onto Roofstock, I was instrigued. First, it opened up possibilities in that I didn't have to choose simply from one of the properties that came up in our neighborhood, but I could choose from any of the areas they have properties in. Second, I liked that with Roofstock there is a partner to help me with the due diligence and there is someone else who has skin in the game when I buy a place. Granted, I have far more skin in the game than they do, but they are still incentivized to provide a good service. Third, buying a property from a turnkey-like company such as Roofstock would truly be a passive investment. I know that I don't want real estate investing to become another full-time job. So if I am able to get to the point where have a little portfolio of rentals, I'd probably rather pay a property manager than do it myself. But the flip-side to that coin, is it better for me to try to manage this first one myself, if for no other reason than to get educated about how to manage a property? 

    Would love to hear y'all's thoughts. 

    0Reply
  • Mushfiq S.
    Seattle, WA · Member since 2016 · 249 posts · 54 votes
    9y
    Great discussions. I purchased a property from Roofstock in November 2016. If any specific questions, happy to answer
    0Reply
  • Andy Winningham
    OP
    Dallas, TX · Member since 2017 · 12 posts · 5 votes
    9y

    @Mushfiq S.

    Thanks for weighing in. Can you tell us what area you purchased in? Also, were you satisfied with the purchase/property after the transaction was over? Was anything different than how it was presented or what you expected? Have you seen the property yourself yet? 

    0Reply
  • Mark Allen
    Real Estate Investor/Broker · Irving, TX · Member since 2015 · 520 posts · 263 votes
    9y

    Love Roofstock's model for new investors!

    0Reply
  • Andy Winningham
    OP
    Dallas, TX · Member since 2017 · 12 posts · 5 votes
    9y

    @Mark Allen

    Thanks for posting. Would you mind sharing more about why you love Roofstock for new investors? Kinda like I said above, I'm also intrigued by it as a way for me to get into the game, but have heard enough warnings from people smarter in REI than me that it's making me hesitate.

    0Reply
  • Mark Allen
    Real Estate Investor/Broker · Irving, TX · Member since 2015 · 520 posts · 263 votes
    9y

    They take all the time consuming, difficult tasks (finding, renovating, leasing, etc.) out and let you be a little more passive - They also seem to support you to close like a broker/agent would.

    @Andy Winningham

    0Reply
  • Nick Yates
    Bloomfield Hills, MI · Member since 2016 · 48 posts · 12 votes
    9y

    I am still following this thread with curiosity too. 

    @Andy Winningham You mentioned two questions in your post above. 

    a) betting that an area will increase is speculation. You can speculate on gut alone or on market data and trends. Maybe a combination is necessary? 

    b) Diversifying investment locations can be a very good thing. I am not invested with multiple properties in one area so I can't say this for certain. But I would hesitate to say 2-3 properties in one location is ok. If there is a natural disaster in the area then that could hurt all investments. Same with the main industry or employer leaving a small town. My two cents only. 

    0Reply
  • Jeff Wallenius
    Specialist · Indianapolis, IN · Member since 2014 · 670 posts · 352 votes
    9y

    This is good dialogue, and I have not verified Roofstock myself. The key to any partnership is transparency and there are a few pitfalls that turnkey investors should be aware of. Does Roofstock place investors with their turnkey partners? Who manages the properties, and is it the same as the company that rehabbed the home? A full service provider is great, but paying a bunch of fees up front is unnecessary even if your looking for a truly passive investment.

    0Reply
  • Manish A.
    Cupertino, CA · Member since 2014 · 59 posts · 22 votes
    9y

    @Ali Boone - To be fair to Roofstock, I think it is great that they are doing lot of due-diligence in advance and saving time for an investor/buyer, and now to go back to your point about inspection - I think I like that I can view the report even before I show my interest, and once I am fully committed then no one is stopping me to get my own inspection done and then issue a final check.

    Regarding fee, they charge 1/2 % of the sale price, and to me that is still less than the premium that Turnkey providers charge. Again, both approaches have its pros and cons and as you said we all need to do our own homework, i.e., run numbers carefully, check the neighborhood, market price, property condition, etc. before we jump into a contract.

    However, I am having the same issue with Roofstock that I am having with Turnkey providers and that is NEIGHBORHOOD quality.

    0Reply
  • Manish A.
    Cupertino, CA · Member since 2014 · 59 posts · 22 votes
    9y

    @Mark Allen & @Jeff Wallenius - AFAIK, Roofstock doesn't renovate/rehabbed the homes since it is purely a marketplace, where they are connecting the buyers and sellers and providing some tools+data to make life easier for both parties.

    0Reply
  • Larry Fried
    Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes
    9y
    Originally posted by @Manish A.:

    @Ali Boone - To be fair to Roofstock, I think it is great that they are doing lot of due-diligence in advance and saving time for an investor/buyer, and now to go back to your point about inspection - I think I like that I can view the report even before I show my interest, and once I am fully committed then no one is stopping me to get my own inspection done and then issue a final check.

    Manish, are you sure about that?  My understanding is that buying via Roofstock excludes having inspections as a contingency in the purchase contract.  It is sold as not imposing on the tenant with additional inspections.  Now I wonder if they've changed that policy or you have different information.

    0Reply
  • Manish A.
    Cupertino, CA · Member since 2014 · 59 posts · 22 votes
    9y
    Larry Fried - I am not sure and was just assuming that since I have not yet bought any property from Roofstock.
    0Reply
  • Larry Fried
    Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes
    9y
    Originally posted by @Manish A.:

    Larry Fried - I am not sure and was just assuming that since I have not yet bought any property from Roofstock.

     Ah, well something to check into, as I am pretty sure you won't have an option for an inspection during escrow.

    0Reply
  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    9y

    @Manish A. Valid things to check into. As with Larry, I'm not sure exactly the contingencies either. The other thing I'm not sure of is the true difference in numbers between regular turnkey companies and Roofstock's fee. Would have to look more into it.

    1Reply
  • Mushfiq S.
    Seattle, WA · Member since 2016 · 249 posts · 54 votes
    9y

    My property is doing well from Roofstock. I made sure to pick a property that had a new roof and hvac. Also I made sure to contact the property management company prior to my purchase to make sure the area is rentable.

    Roofstock does not allow an inspection during escrow. You are allowed to bring your own lender and property manager if you wish.

    Roofstock was my first invesment and now I have put together a team on the ground in the same location and have purchase 3 more properties. I see Roofstock as a starting ground for beginners.

    6Reply
  • Kim Meredith HamptonBusiness Member
    Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
    9y
    Andy Winningham A different point of view as a Certified Property Manager with RoofStock on Florida. We work with many groups, hedge funds, banks etc.... and find that Roofstock is transparent, does all the leg work up front, title, inspections, renters in place, lease in place, immediate cash flow at closing, vetted Property Managers, provide financing, savings on commissions!!! What's not to like about this model. I have worked with them for over a year, and every one of my new clients/investors have been extremely happy with the property and experience. This model may not work for everyone, but for those who want a transparent and efficient model to buy their investments, I think Bosnia a great alternative. In addition, they now offer Propeties under $100k, portfolios etc... they not only work with different hedge funds, but individual investors selling their properties. Take a look, I think you will be happy you did
    [email protected]407-448-6679Podcast Guest on Show The Key to Scoring Discounted Deals in One of America’s Hottest Markets
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  • Andy Winningham
    OP
    Dallas, TX · Member since 2017 · 12 posts · 5 votes
    9y

    Thanks for the insight @Kim Meredith Hampton! 

    0Reply
  • Azmat Hossain
    Rental Property Investor · Florida State, FL · Member since 2017 · 41 posts · 8 votes
    8y

    What other website like roof stock its out there ?  I am trying buy some rental.

    0Reply
  • Scott Morongell
    Investor · Charlotte, NC · Member since 2017 · 791 posts · 479 votes
    8y

    @Andy Winningham I do not have experience with roofstock. However, what you could do is find someone local who is doing what you want to do and partner with them on a few deals to learn from first hand experience.

    0Reply
  • Heshel Mangel
    Member since 2018 · 208 posts · 90 votes
    7y
    Originally posted by @Mushfiq S.:

    My property is doing well from Roofstock. I made sure to pick a property that had a new roof and hvac. Also I made sure to contact the property management company prior to my purchase to make sure the area is rentable.

    Roofstock does not allow an inspection during escrow. You are allowed to bring your own lender and property manager if you wish.

    Roofstock was my first invesment and now I have put together a team on the ground in the same location and have purchase 3 more properties. I see Roofstock as a starting ground for beginners.

    Sorry for jumping on this thread so late. This is something I am looking into, and finding it hard to find a property that fits sound investment criteria on Roofstock. 

    How did you filter the properties to get what you were looking for? Did you use their lenders and PM? Were you able to put in an offer that gave you some space to work with on fixups? 

    Would love to hear your thoughts!

    0Reply
  • Mushfiq S.
    Seattle, WA · Member since 2016 · 249 posts · 54 votes
    7y

    @Heshel Mangel

    Roofstock is overpriced now. I have been unable to find a property that fits criteria as well. 

    0Reply
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