Roofstock Case Study

193 Replies

Originally posted by @Jason Pennacchio :

@Jason Gines makes another great point, you're paying a slight premium at times to have pre-vetted, pre-inspected (although at times questionable inspections), pre-researched homes. When I switched from roofstock to a property manager/agent I had one inspection come back horrendous and you have to really think in a tight margin environment how many times can you afford to spend $300-$400 just to find a home is not doable. Unfortunately the way to get around this as an out-of-state investor is to have a property manager do a walkthrough who is knowledgeable in eyeballing major issues, (structure, roof, hvac, electrical) so you can have a general idea as to whether to continue on to the inspection or run the other way. I bid on a home which the agent visited and said don't even bother, unless the seller wants to drop 20% of their asking or so off the bat. (ALWAYS have a due diligence clause), (most sellers know what shape their property is in and most likely won't come down in a competitive market unless they're old listings or repeatedly failing inspections).

@Kevin Charles I think you have the right idea but I will say this to you in no offensive manner, "you and everybody else". Roofstock definitely gives you an idea what's going on but any homes that look like a deal are being viewed by hundreds/thousands (assuming). To get an edge and find a true deal you're going to have to put some sweat-equity into researching homes more in depth and run your own numbers/analysis. When YOU see it as a deal and Roofstock doesn't give that impression you're more likely to get a good price. (Ex. Roofstock has a home listed as "2 star", 5% cap, ok neighborhood, but ur personal research reveals its actually 3 star, 7 cap, good neighborhood). I personally will reiterate the need to know the market where you're looking. Using general filter isn't good enough, you need to learn the neighborhoods and even streets if you can so you know what you're bidding on. You can do this from out-of-state with some extra effort, lots of it.

Couldn’t agree with you more @Jason Pennacchio. Thanks for the message and advice. There definitely are deals that are gone within a day. You also have to do your own due diligence because sometimes the numbers Roofstock uses may not be accurate and that 8 cap is really a 6. I guess my question for you and  @Jason Ginesis is more if do you wait patiently for those houses that fit that ideal criteria and make an offer immediately, focus on finding the coals that really are diamonds like the 2 star 5 caps that are really 3 star 7 caps as you mention, or focus on higher risk for higher returns? 

Originally posted by @Kevin Charles :
Originally posted by @Jason Pennacchio:

@Jason Gines makes another great point, you're paying a slight premium at times to have pre-vetted, pre-inspected (although at times questionable inspections), pre-researched homes. When I switched from roofstock to a property manager/agent I had one inspection come back horrendous and you have to really think in a tight margin environment how many times can you afford to spend $300-$400 just to find a home is not doable. Unfortunately the way to get around this as an out-of-state investor is to have a property manager do a walkthrough who is knowledgeable in eyeballing major issues, (structure, roof, hvac, electrical) so you can have a general idea as to whether to continue on to the inspection or run the other way. I bid on a home which the agent visited and said don't even bother, unless the seller wants to drop 20% of their asking or so off the bat. (ALWAYS have a due diligence clause), (most sellers know what shape their property is in and most likely won't come down in a competitive market unless they're old listings or repeatedly failing inspections).

@Kevin Charles I think you have the right idea but I will say this to you in no offensive manner, "you and everybody else". Roofstock definitely gives you an idea what's going on but any homes that look like a deal are being viewed by hundreds/thousands (assuming). To get an edge and find a true deal you're going to have to put some sweat-equity into researching homes more in depth and run your own numbers/analysis. When YOU see it as a deal and Roofstock doesn't give that impression you're more likely to get a good price. (Ex. Roofstock has a home listed as "2 star", 5% cap, ok neighborhood, but ur personal research reveals its actually 3 star, 7 cap, good neighborhood). I personally will reiterate the need to know the market where you're looking. Using general filter isn't good enough, you need to learn the neighborhoods and even streets if you can so you know what you're bidding on. You can do this from out-of-state with some extra effort, lots of it.

Couldn’t agree with you more @Jason Pennacchio. Thanks for the message and advice. There definitely are deals that are gone within a day. You also have to do your own due diligence because sometimes the numbers Roofstock uses may not be accurate and that 8 cap is really a 6. I guess my question for you and  @Jason Ginesis is more if do you wait patiently for those houses that fit that ideal criteria and make an offer immediately, focus on finding the coals that really are diamonds like the 2 star 5 caps that are really 3 star 7 caps as you mention, or focus on higher risk for higher returns? 

Every market is different and you have to know the market. What your long term investment strategy is also is very relevant. With the Atlanta Metro Market for SFH I'm looking at areas where there is appreciation in property value and rent and where I can cash flow 100-300 a month after all expenses with the intention of keeping that property until the day I keel over and die. So over time rent will increase and as should cash flow and over even more time mortgages will pay themselves off and cash flow will skyrocket and maybe with the appreciation I could sell a few to pay off others. Right now we are just in savings mode to purchase our next investment, hopefully later this year or early next. It takes time to save the down payments and in the mean time I am on sites like Roofstock and Zillow every day saving properties that would interest me so I can keep track of current price trends. We aren't sure right now if we want to pick up another SFH, duplex, or go bigger with a quad. Each having their pros and cons and different analysis. Everyone's number analysis should be tailored to their own needs. If the numbers aren't working then you might have to look at different markets. After you've bought a few properties in a market though you should know your numbers. You should know how much YOUR PM charges you (not a guestimate Roofstock or someone else is giving you), you should know approximately what YOUR insurance carrier will charge you for a premium, and you will know how much YOU plan on putting towards reserves. Just remember none of this is a get rich quick endeavor and will take many many years of slowly building a portfolio. If you want more bang for your buck you can always buy distressed properties and fix them up yourself. But if you are buying properties in very good shape in decent neighborhoods in hot markets your margins are going to likely be tight.

Disclosure: I am a Roofstock employee

@Jason Gines thanks for sharing this super in-depth account of your experience investing through Roofstock! Appreciate you being transparent about what you liked and what you thought could be improved. By the way, read your comments regarding tax rates being set a little too high. We typically try to be as conservative as possible with cost estimates to make sure we're not over promising/under delivering returns to potential investors. I think every investor should also run their own numbers too, just to see what that looks like as well. But on the product side, tax estimates is something our data science and underwriting teams continue to refine as we process more transactions in each market.

@Jason Gines

My PM ask me to fill out W9.I have no LLC yet.

so I am not sure How PM will handle my SSN on W9.I will ask W9 from them too.

1) How did you do with W9?

I choose realprotect for my rental insurance.

2) How you choose lower or higher deductible for your first property?

Thanks inadvance

Thiri

Originally posted by @Hnin Thiri :

@Jason Gines

My PM ask me to fill out W9.I have no LLC yet.

so I am not sure How PM will handle my SSN on W9.I will ask W9 from them too.

1) How did you do with W9?

I choose realprotect for my rental insurance.

2) How you choose lower or higher deductible for your first property?

Thanks inadvance

Thiri

I did not form an LLC. I have insurance and then an umbrella policy. So properties are in personal name and property management tax documents are in my personal name and social. I chose the lower deductible for insurance for all five properties. It is based on your comfort with varying levels of exposure.

 

Originally posted by @Antonio Cucciniello :

@Jason Gines Thanks so much for this, being in NYC I am looking to take my money elsewhere for cashflow.  I came across Roofstock and was skeptical.  Any update on how you feel abiut

I'm very happy with the properties.  Last year around this time on this thread I posted the numbers for each property owned for at least a full year.  As I prepare my documents for taxes I will do the same and do a side by side with the 2018 numbers so everyone can see for themselves the results, just laying out the numbers without any opinion mixed in.  So that should be up here probably sometime in February.  

 

@Jason Gines Thanks and looking forward to it
@Antonio Cucciniello here is my journey with roofstock
I found roof stock from Bigger pocket forum, roofstock case study. I followed step by step from the case study. I started looking for the property from 1st week of October 2019.I made 2 to 3 offers per week after calculating and researching. I also viewed webinar series on roofstock. I checked all diligence documents and financial highlight from roofstock. I learned about rental properties calculator, pest control ,property tax,home insurance, property management and Lender review etc. from Bigger Pocket forum. I also checked zillow and other market places for property value, neighborhood etc .

Roofstock advisor was helpful. He answered all my questions as soon as possible. He recommended me the Lender and sent me email about properties that I might be interested.

After some offers were made, 2 of them were rejected.4 of them asked for counter-offer. Later then 2 only left. I checked every single page of roofstock inspection report and looked for the value to add like how old is the HVAC system & Roof , Garage size etc. I found one of the properties was needed pest control and AC unit was missing in the report. I asked advisor to check with seller team. Advisor replied me seller want to sell as it is. I understood Roofstock is not turn-key company. So,I checked AC unit cost and run the numbers. I decided not to make counter-offer back. Then I accepted the counter offer for the other unit on October 31. Accepted offer was 1.5k less than listed. Appraisal from bank came back the value of the property with 2k more than my offer which is great to move forward.

My frustration moments for purchasing 1st property with Roofstock

1)Buyer information sheet

Based on Roofstock check list,Once Purchase and Sale Agreement is signed, Roofstock will send you a copy of the lease and Buyer Info Sheet that is needed to open escrow.

I waited for Roofstock Transaction coordinator (TC) to get Buyer Info sheet to fill out and sent for Escrow. Escrow agent also asked me for buyer info sheet one day after signing PSA.I am not sure who is responsible for. TC have no idea what is buyer info sheet and she said checklist need to amend and will check with Escrow agent. After 3 days,I directly asked Escrow agent for buyer info sheet. Escrow agent sent me buyer info sheet later that day.

2)Outstanding Property Tax

I was aware that outstanding property tax was 1950$ by checking county website for 2019. TC said 56$.I found out 1950$ in the closing statement.

3) Closing date

We done mobile notary on 5 December after wire transferring the closing funds. Seller couldn't make it to sign on the same day , due to emergency. We needed to redo the mobile notary again and Final closing was done later on 9th December.

4) Property Transaction from old PM to new PM

I am not sure who is responsible for transaction from current PM to New PM.I checked with new PM about transaction 13 December. They said they still waiting on closing, lease, and tenant info from the closing office or Roof stock. I sent email to TC and cc to closing agent. TC replied with all information that my PM need and asked my PM to contact to current PM directly. Closing agent said still have not heard back from my PM and asked me for my PM address to post rental deposit on 16 December. My PM replied me they received the deposit on 2nd January 2020.

5)Error on title

I received the original deed on 3rd January 2020.Tittle insurance policy was under both name. But my husband name was not included on deed. The reason may be mortgage is under my name only. But I am not sure. I called and email to tittle company and roofstock TC. Title officer asked me to send it back original title to rerecording it again. I am still waiting for original title with Me and my husband name on it.

Entire buying process took about 2 months. I earned 135 (net income) per month from that property which is good starting.

All above review is based on my personal experience. Different agents may handle differently for each case. In my case,not holding my hand in each step. Every time I needed to ask for next step. I think roofstock need more transparency and better communication in process. I have learned many things through out the process. I think I am more familiar with the process. I may use the roofstock again.
Hope this helps.

Originally posted by @Hnin Thiri :

@Jason Gines Thanks and looking forward to it
@Antonio Cucciniello here is my journey with roofstock
I found roof stock from Bigger pocket forum, roofstock case study. I followed step by step from the case study. I started looking for the property from 1st week of October 2019.I made 2 to 3 offers per week after calculating and researching. I also viewed webinar series on roofstock. I checked all diligence documents and financial highlight from roofstock. I learned about rental properties calculator, pest control ,property tax,home insurance, property management and Lender review etc. from Bigger Pocket forum. I also checked zillow and other market places for property value, neighborhood etc .

Roofstock advisor was helpful. He answered all my questions as soon as possible. He recommended me the Lender and sent me email about properties that I might be interested.

After some offers were made, 2 of them were rejected.4 of them asked for counter-offer. Later then 2 only left. I checked every single page of roofstock inspection report and looked for the value to add like how old is the HVAC system & Roof , Garage size etc. I found one of the properties was needed pest control and AC unit was missing in the report. I asked advisor to check with seller team. Advisor replied me seller want to sell as it is. I understood Roofstock is not turn-key company. So,I checked AC unit cost and run the numbers. I decided not to make counter-offer back. Then I accepted the counter offer for the other unit on October 31. Accepted offer was 1.5k less than listed. Appraisal from bank came back the value of the property with 2k more than my offer which is great to move forward.

My frustration moments for purchasing 1st property with Roofstock

1)Buyer information sheet

Based on Roofstock check list,Once Purchase and Sale Agreement is signed, Roofstock will send you a copy of the lease and Buyer Info Sheet that is needed to open escrow.

I waited for Roofstock Transaction coordinator (TC) to get Buyer Info sheet to fill out and sent for Escrow. Escrow agent also asked me for buyer info sheet one day after signing PSA.I am not sure who is responsible for. TC have no idea what is buyer info sheet and she said checklist need to amend and will check with Escrow agent. After 3 days,I directly asked Escrow agent for buyer info sheet. Escrow agent sent me buyer info sheet later that day.

2)Outstanding Property Tax

I was aware that outstanding property tax was 1950$ by checking county website for 2019. TC said 56$.I found out 1950$ in the closing statement.

3) Closing date

We done mobile notary on 5 December after wire transferring the closing funds. Seller couldn't make it to sign on the same day , due to emergency. We needed to redo the mobile notary again and Final closing was done later on 9th December.

4) Property Transaction from old PM to new PM

I am not sure who is responsible for transaction from current PM to New PM.I checked with new PM about transaction 13 December. They said they still waiting on closing, lease, and tenant info from the closing office or Roof stock. I sent email to TC and cc to closing agent. TC replied with all information that my PM need and asked my PM to contact to current PM directly. Closing agent said still have not heard back from my PM and asked me for my PM address to post rental deposit on 16 December. My PM replied me they received the deposit on 2nd January 2020.

5)Error on title

I received the original deed on 3rd January 2020.Tittle insurance policy was under both name. But my husband name was not included on deed. The reason may be mortgage is under my name only. But I am not sure. I called and email to tittle company and roofstock TC. Title officer asked me to send it back original title to rerecording it again. I am still waiting for original title with Me and my husband name on it.

Entire buying process took about 2 months. I earned 135 (net income) per month from that property which is good starting.

All above review is based on my personal experience. Different agents may handle differently for each case. In my case,not holding my hand in each step. Every time I needed to ask for next step. I think roofstock need more transparency and better communication in process. I have learned many things through out the process. I think I am more familiar with the process. I may use the roofstock again.
Hope this helps.

 Thank you for this explanation. So it seems like you had some troubles but bottom line you are ok with the outcome of the property?

Below are the raw number breakdowns for each of our five Georgia properties for 2019.

In total we grossed $72,865.78.

Specific property expenses totaled: $55,550.11

However, we also have a $2m umbrella policy which cost $1,182 annually and we utilized a HELOC for some of the purchases whose annual interest totaled $5,548.28. Factoring those costs in, since they are directly related to the investment portfolio, total expenses for the portfolio totaled: $62,280.39

In the end our net income was: $10,585.39

When looking at these numbers please note that I prepared this in the course of my preparations for my taxes and did not include principal paydown on any of the mortgages as an expense. But for purposes of full transparency and to allow you guys to calculate things out using whatever numbers you wish, the principal payments across all five properties were $1,069.41 (Lithonia) + $1,583.06 (Villa Rica) + $1,890.83 (Canton) + $2,175.15 (Dacula) $1,228.40 (Conyers) for a total of: $7,946.85.

So our total actual cash flow for the year was $2,638.54 or $219.88 a month. That comes out to around $43.98 per property per month. So ultimately, not an impressive year for cash flow. We had some maintenance and repairs that really ate into it.

The way we look at these properties is like having a pension plan for when we retire. We are in our late thirties right now. These are all long term buy and hold investments that will probably remain with us until we move on from this world, so once they are paid off we can really appreciate the cash flow and as we get close to retirement we may sell one or more to pay off the others. Hopefully they will continue to appreciate and we will be able to continue to steadily raise rents over time. Right now our goal is to pay off our primary residence and the HELOC, which should only take another few years but we've put picking up more properties on hold for the time being until that is done. The wife is currently between jobs and that made us realize the importance of not being over leveraged and having the primary residence mortgage and HELOC paid off would give us a lot of peace of mind.

Feel free to ask any questions you like. I will continue to respond on this thread and chronicle my real estate investing journey and around this time each year will continue to post our results.

Lithonia, GA SFH: Purchased in July 2017 for $81,000

Rent: $11,172.23
Property Management: $1,003.06
Maintenance & Repairs: $3,928.00
Interest: $2,986.95
Taxes: $2,060.42
Insurance: $689.52
Net: $504.28

Villa Rica, GA SFH: Purchased in October 2017 for $119,300

Rent: $12,023.55
Property Management: $1,455.38
Maintenance & Repairs: $2,300.00
Utilities: $520.10
Interest: $4,305.22
Taxes: $1,138.07
Insurance: $686.40
Net: $1,618.38

Canton, GA SFH: Purchased in October 2017 for $145,500

Rent: $15,600.00
Property Management: $1,846.00
Maintenance & Repairs: $0.00
Interest: $5,395.57
Taxes: $2,248.19
Insurance: $818.48
HOA: $1,350.00
Net: $3,941.76

Dacula, GA SFH: Purchased in April 2018 for $179,000

Rent: $16,920.00
Property Management: $1,501.70
Maintenance & Repairs: $175.00
Interest: $7,049.61
Taxes: $2,823.61
Insurance: $1,009.84
Net: $4,360.24

Conyers, GA Duplex: Purchased in December 2018 for $127,000

Rent: $17,150.00
Property Management: $1,802.50
Maintenance & Repairs: $835.00
Utilities: $42.63
Interest: $4,557.27
Taxes: $1,870.31
Insurance: $1,151.28
Net: $6,891.01

Let me be another one to thank you for your detail description on your RoofStock path @Jason Gines !! I just finished reading it from first day up to the 2019 report.

Would like to ask you some points that would help me better your experience

1. Are the PM costs inline with what roofstock is claiming on their site?

2. Were you able to leverage your portfolio in GA to decrease PM costs?

3. Interesting to see that your Canton property had a huge decrease on the CapEx, seems that the 2018 investments were a good choice.

4. Can you elaborate a bit more on the 2m umbrella policy that you use to avoid going for the LLC model?

all the best for 2020!

Originally posted by @Tiago Camilo :

Let me be another one to thank you for your detail description on your RoofStock path @Jason Gines!! I just finished reading it from first day up to the 2019 report.

Would like to ask you some points that would help me better your experience

1. Are the PM costs inline with what roofstock is claiming on their site?

2. Were you able to leverage your portfolio in GA to decrease PM costs?

3. Interesting to see that your Canton property had a huge decrease on the CapEx, seems that the 2018 investments were a good choice.

4. Can you elaborate a bit more on the 2m umbrella policy that you use to avoid going for the LLC model?

all the best for 2020!

The particular PM we used had a discount through using Roofstock and the discount was below Roofstock's estimated calculation. Because of the discount there wasn't an additional one given for more properties managed. If you create an LLC you will need a commercial loan and insurance vs buying in your own name and getting a lower rate conventional loan, insurance, and an umbrella. Some people transfer a property to an LLC after purchasing in their own name and getting a conventional mortgage, but that can trigger a due on sale clause and depending on how the LLC is run may or may not provide the protection needed. There are lots of threads on umbrella vs LLC that provide a lot of valuable insight.

 

@Jason Gines Just read through this great thread! What are your main take a ways on which types of properties to purchase and has your strategy changed since you started? In terms of quality, age, purchase price, neighborhood type, market, duplex/SFH. Also, how much time do you spend on your existing properties and how much time looking for new properties each month?

Originally posted by @Tyler M. :

@Jason Gines Just read through this great thread! What are your main take a ways on which types of properties to purchase and has your strategy changed since you started? In terms of quality, age, purchase price, neighborhood type, market, duplex/SFH. Also, how much time do you spend on your existing properties and how much time looking for new properties each month?

I think this is a great question, as an Atlanta investor and someone following the roofstock story since the beginning I'd love to read @Jason Gines's response. Also props to Roofstock for having employees monitor and respond on forums such as these, shows dedication. 

One question @Jason Gines, would you be able to provide the lender you've been using? Since the world is currently, sadly, falling apart I'm sure you've seen interest rates are dramatically lower. I've inquired twice with my lender in the past year for a refinance to lower interest rates, I'm at 4.75% now but even most recently they wouldn't budge below 4.25%. Can't tell if that's typical or good? I also went the personal, insured route vs setting up an LLC. Anyone with advise on rates can chime in.

 

Originally posted by @Tyler M. :

@Jason Gines Just read through this great thread! What are your main take a ways on which types of properties to purchase and has your strategy changed since you started? In terms of quality, age, purchase price, neighborhood type, market, duplex/SFH. Also, how much time do you spend on your existing properties and how much time looking for new properties each month?

I look at properties online every few days.  We were originally concerned with the duplex tenants after purchase because we wanted them to sign an updated lease simply reflecting that the lease was between us and them now vs the prior owner and the property management company was having such difficulty having that done from them.  But after that was completed they have been fine and I think our next purchase will probably be a multifamily.  And yes, our investment strategy became more refined based upon evaluating choices we've made with our current purchases. We spend practically no time on our current properties.  Our PM contacts us if a maintenance request order has been made by a tenant or if a periodic inspection was completed, but otherwise they are pretty much passive investments. 

 

Originally posted by @Jason Pennacchio :
Originally posted by @Tyler M.:

@Jason Gines Just read through this great thread! What are your main take a ways on which types of properties to purchase and has your strategy changed since you started? In terms of quality, age, purchase price, neighborhood type, market, duplex/SFH. Also, how much time do you spend on your existing properties and how much time looking for new properties each month?

I think this is a great question, as an Atlanta investor and someone following the roofstock story since the beginning I'd love to read @Jason Gines's response. Also props to Roofstock for having employees monitor and respond on forums such as these, shows dedication. 

One question @Jason Gines, would you be able to provide the lender you've been using? Since the world is currently, sadly, falling apart I'm sure you've seen interest rates are dramatically lower. I've inquired twice with my lender in the past year for a refinance to lower interest rates, I'm at 4.75% now but even most recently they wouldn't budge below 4.25%. Can't tell if that's typical or good? I also went the personal, insured route vs setting up an LLC. Anyone with advise on rates can chime in.


 

Better Mortgage.  I believe that if you connect to them through BiggerPockets there is a 1k credit they apply.  Should be under member perks or some other similar section here on the site.  Be aware though that even though mortgage rates are very low now, they are likely going to be higher for investment properties vs owner occupied.  All my properties are between 4-5%.

 

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