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Roofstock Review – Best Way to Buy Rental Properties Long-Distance?


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Roofstock Logo

Our rating

4.4/5

Roofstock Pros

  • Rigorous property certification process
  • Reasonable fees and solid guarantees for buyers
  • Vetted property managers in local markets

Roofstock Cons

  • Moderate returns overall
  • Potential for stiff competition among buyers
  • Risks for novices who don’t do due diligence


Additional Resources

Rental properties come with plenty of advantages, including tax benefits, protection against inflation, passive income, and diversification from equities.

They also come with a steep learning curve. And the challenge compounds when you aim to invest long-distance in properties you’ve never seen.

Roofstock aims to change that. If you’ve weighed the pros and cons of buying rental properties and feel ready to pull the trigger, here’s what you need to know about Roofstock.

Roofstock property analysis details

Key Features of Roofstock

One way to think of Roofstock is as an Amazon for rental properties. It’s a platform for buying and selling income properties, backed with data and guarantees.

As a nationwide real estate listing website specifically for rental properties, Roofstock combines local partnerships with a rigorous certification process for each property listed. The result is an easy way to buy investment properties in dozens of markets across the country. In fact, Roofstock claims that the majority (62%) of its transactions involve buyers who live over 1,000 miles away from the properties they purchase.

The online marketplace includes an impressive feature set that makes it easy to evaluate, buy, and manage single-family rental properties. Perhaps too easy — but more on that later.

Data

Before buying any investment, shrewd real estate investors want data, and lots of it. And Roofstock delivers it.

First, Roofstock includes several measures of a property’s returns, including capitalization (cap) rate, cash-on-cash return, annualized return, gross yield, annual cash flow, and appreciation. They also let you adjust the purchase price, down payment, financing interest rate, and rent to see how these changes would affect the property’s returns.

Likewise, investors can review detailed expense figures for each property: insurance, property taxes, property management fees, repairs and maintenance, vacancy rate — all broken down in detail, for both past expenses and expected costs for the next year. Roofstock also includes estimated closing costs and lets you modify them based on your own estimates.

And the data doesn’t end with the real estate investment itself. Roofstock also showcases data about the neighborhood using a five-star rating system. Neighborhood metrics include median home values, median incomes, the quality of local public schools, local employment rate, and percent of owner-occupied homes.

If you’re familiar with the common letter-grading system for neighborhoods, Roofstock’s neighborhood ratings are analogous. A five-star neighborhood corresponds to an “A” grade neighborhood, four stars to “B,” and so forth.

Listings also display the occupancy status of the property — whether it’s vacant or occupied by a tenant. If it’s occupied, you can view the current tenant’s payment history and leasing details such as the rent, lease start and end dates, and security deposit amount.

Property Certification Process

To compile the data above, Roofstock subjects each property to a rigorous certification process.

They order a home inspection from an independent and prescreened home inspector. The key findings are summarized for buyers to read, and the full inspection report is available for download as well. Roofstock includes estimates for each necessary or recommended repair.

To ensure there are no surprise liens or encumbrances, they order preliminary title reports on the property as well. They also verify whether the property belongs to a homeowners association and summarize any fees, restrictions, or other terms.

Finally, they collect copies of leases and other rent history documentation to ensure accurate data.

Certified Local Property Managers

The decision to hire a property manager gets easier when you live 1,000 miles away from your rental property.

When Roofstock enters a new real estate market, they scout and evaluate local property management firms to find the most reliable and professional managers available locally. After interviewing and certifying property managers who meet their standards, they list local options for each property. Each manager’s fee structure appears beside it for easy cost comparisons.

After all, what Roofstock is selling is ease of purchase and ownership from anywhere in the world. They want buyers to feel confident and trust that they won’t be ripped off or suffer losses from a negligent property management company.

Roofstock - $4B in completed sales, 30-day money back guarantee, end-to-end support

Guarantees

One of the most compelling features of Roofstock is its double guarantee.

First, they offer a 30-day money-back guarantee. If you buy a property on their platform and aren’t happy with it, you can “return” it within 30 days. Roofstock relists the property for sale, waiving their normal fees (more on those shortly), and guarantees your original purchase price. Should the property sell for less, they pay any shortfall. If the property fails to sell within 90 days, they buy it back from you themselves.

Beyond a satisfaction guarantee, they also guarantee fast rental income. For vacant homes, Roofstock guarantees you will find a qualified tenant within 45 days of buying, and if you don’t, they pay you 90% of the market rent until you do place a tenant.

Both guarantees come with a laundry list of fine print, of course. The rent guarantee only applies to single-family homes, not multifamily properties, and you must use one of Roofstock’s certified property managers. The 30-day happiness guarantee can only be invoked for a maximum of one property every 90 days, along with a few other caveats. Be sure to read the fine print before getting too cozy with the idea that the guarantees will protect you from any and all risks.

Option to Buy Entire Portfolios

Hungry for multiple properties? Some sellers list several properties as a portfolio for combined purchase. They set a minimum number of properties that must be bought simultaneously. You can specifically browse portfolios of properties if you’re looking to buy in bulk, perhaps at a discount compared to buying individual properties.

Robust Search Filters

Sorting by portfolio isn’t the only search filter available. Buyers can also sort by factors such as price, cap rate, local real estate appreciation rates, neighborhood quality, occupancy, and home age.

Again, Roofstock’s goal is to make buying anywhere in the country easy. Given the number of properties listed at any given moment, powerful sorting options are mission-critical.


Roofstock Fees

Roofstock’s pricing and revenue model is refreshingly simple and transparent.

For sellers, they charge a marketplace fee of 3% of the sales price, with a minimum fee of $2,500. That’s half the typical real estate agent’s commission, which ranges from 5% to 7%.

Roofstock also charges buyers a transaction fee, equal to 0.5% of the sales price or a minimum of $500.

Roofstock offer process - 0.5% buyer fee

Advantages of Roofstock

Roofstock has a number of key advantages that make it very attractive to investors seeking exposure to the residential real estate market. Its pricing is favorable to buyers and it does a good job of smoothing the many roadblocks that come between nonprofessional investors and their dreams of a diversified rental portfolio.

  • Rigorous Property Certification Process. Roofstock has a rigorous property certification process that ensures homes listed for sale on its platform are up to its exacting standards. Though this can’t substitute for due diligence, it offers more protection than buying “sight unseen,” with all the risk that entails.
  • Exposure to Lots of Different Real Estate Markets. Roofstock is geographically diversified. Though it’s heavy on Sunbelt exposure, its inventory covers dozens of metro areas from coast to coast, reducing the impacts of localized economic downturns.
  • Solid Guarantees for Buyers. Roofstock offers two solid guarantees for buyers: a 30-day money-back satisfaction guarantee and a 45-day “fully rented” guarantee. Setting aside the considerable fine print on the money-back guarantee, both offer significant financial protection in the event that things don’t work out.
  • Reasonable Fees for Buyers. The sole fee Roofstock charges buyers comes to 0.5% of the purchase price (minimum $500). That’s on par with or perhaps less than the out-of-pocket fees buyers can expect to pay in a traditional real estate transaction, depending on where they’re buying.
  • Certified Local Property Managers, Inspectors, and More. Roofstock finds and vets real estate professionals in every market where it does business. Most importantly, Roofstock connects buyers with reputable property managers, but it also has a lineup of home inspectors and title companies too.

Disadvantages of Roofstock

No service is without its downsides.

In the case of Roofstock, those downsides prove subtle and are arguably a result of the platform being a little too successful at making rental properties easy for anyone to buy. When it’s too easy to invest, buyer demand increases, driving down returns and putting some investors at greater risk than they expected.

  • Moderate Returns. At the time of this review, there were 728 properties listed for sale on Roofstock, and only five of them offered projected cap rates over 10%. Not surprisingly, nearly all were in one- or two-star neighborhoods. Most of the properties for sale on Roofstock offer only middling returns in the 3% to 8% range — enough to justify a purchase, perhaps, but not enough to smugly congratulate yourself on scoring a stellar deal.
  • Potential for Stiff Competition. Traditionally, rental properties have offered strong returns for savvy investors because of the relatively high barriers to entry. One of those barriers is knowledge; it takes some skill to invest profitably. Roofstock aims to minimize the skill and specialized knowledge required by streamlining the process as much as possible. But by making it simple for anyone, anywhere to buy a rental property, it leaves the gates open for more investors to flood the market.
  • Temptation to Skip Due Diligence. When you buy a property long-distance, you probably don’t know the local market very well. A smart investor researches the local market thoroughly, from population trends to job market trends to future development projects. So, do your own due diligence, ideally by visiting the city and neighborhood yourself and talking to landlords and property managers on the ground about local vacancy rates and other trends.
  • Temptation to Invest Without Learning the Fundamentals. Being an effective landlord isn’t always intuitive. Just as Roofstock’s data can lull first-time investors into thinking they know the local market, the ease of buying and management can lull them into thinking they know everything they need to know about rental investing. While, Roofstock can connect you with title companies, property managers, and home inspectors, none of that prepares you for the realities of managing tenants or property managers, budgeting for fluctuating expenses, or understanding the forces that can drive rents and values up or down.
Roofstock investment example - rowhouse portfolio in Pottsville PA

How Roofstock Stacks Up

Roofstock is just one of many digital platforms that let regular folks buy and sell real estate. Though its model is unique, it considers several of these platforms to be close competitors. 

One such competitor is Groundfloor, a real estate crowdfunding platform that’s more accessible than Roofstock but may offer less upside for long-term investors.

RoofstockGroundfloor
Investment TypesDirect purchases of residential real estate, either individually or in tranchesShares of hard money loans issued to real estate investors
Minimum InvestmentVariable, but you must have enough to cover the down payment on your purchase$10 per share, with a minimum of 1 share per investment
FeesBuyer pays Roofstock 0.5% of the purchase price ($500 minimum)No fees to investors; borrowers cover all loan fees
Possible ReturnVariable, but 3% to 8% is typical6% to well over 10%, depending on borrower risk

Final Word

Roofstock offers an easy way to buy turnkey rental properties and invest long-distance. It also democratizes the process of investing, opening the door for new investors to build income from rentals.

You can use that income to help pay for your kids’ college education, reach financial independence and retire early, or simply boost your lifestyle. And no one says you have to use properties on Roofstock as traditional rentals; you could always use the platform to find your next property to rent on Airbnb.

Just be careful not to lean too heavily on Roofstock’s data and streamlining as an excuse to avoid your own due diligence. It’s a well-organized platform, but ultimately it’s still just a platform for finding properties for sale. You’re the one who has to live with the profits or losses, so you’re the one who has to learn real estate investing properly.

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The Verdict

Roofstock Logo

Our rating

4.4/5

Roofstock Pros

  • Rigorous property certification process
  • Reasonable fees and solid guarantees for buyers
  • Vetted property managers in local markets

Roofstock Cons

  • Moderate returns overall
  • Potential for stiff competition among buyers
  • Risks for novices who don’t do due diligence
Editorial Note: The editorial content on this page is not provided by any bank, credit card issuer, airline, or hotel chain, and has not been reviewed, approved, or otherwise endorsed by any of these entities. Opinions expressed here are the author's alone, not those of the bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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G. Brian Davis is a real estate investor, personal finance writer, and travel addict mildly obsessed with FIRE. He spends nine months of the year in Abu Dhabi, and splits the rest of the year between his hometown of Baltimore and traveling the world.

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