Investors have several options for where to put their money in an attempt to grow their wealth. Many people choose traditional investments, such as mutual funds and exchange-traded funds (ETFs). However, some prefer to invest in physical assets, such as real estate.
Traditionally, investing in real estate typically involved a lot of work. You’d generally have to find a property to purchase, make repairs to the property, find a tenant, manage the property and tenant, and more. Doorvest aims to streamline this process so you can purchase a rental property online. Then, they manage it on your behalf for a fee. Here’s what you need to know about this unique platform.
What is Doorvest?
Doorvest was founded in 2018 by co-founder/CEO Andrew Luong and co-founder/CTO Justin Kasad. The company’s goal is to democratize the path to financial security by allowing people to invest directly in residential real estate in a simple and frictionless way. It plans to achieve this by enabling people to buy rental properties entirely virtually and then managing those properties on the owners’ behalf.
Doorvest is headquartered in San Francisco and currently manages over $20,000,000 in real estate and has received over $2,500,000 in seed funding to grow the business.
|Minimum investment||Varies based on mortgage requirements and home price but expect at least $35,000|
|Investment time frame||Ideal for long term investors|
|Best for...||People comfortable investing in real estate outside of their local market that value simplicity over profits.|
What does Doorvest offer?
Doorvest currently allows people to invest in residential rental properties in the Houston, Texas, area, starting with as little as $35,000. The company mentions it may invest in other markets in the future but does not provide a timeline. Doorvest’s model is different from some other services, like DiversyFund, that sell partial shares of a rental property using a crowdfunding model.
Doorvest tends to purchase three-bedroom, two-bathroom, single-family homes with two-car garages built after 1970. These rental homes generally attract long-term residents and appreciate the most, according to Doorvest. That said, the property you purchase will be based on your specific needs and budget, so this may vary.
Doorvest purchases and renovates houses then sells them to their customers, earning a profit in the process. After you purchase a home through the service, Doorvest manages the rental property for you for at least one year. For this service, they charge a management fee of 15% of the rent collected.
Doorvest supports its investors throughout the entire process to help them find a suitable rental property investment. You start the process by sharing information about your financial situation and investing goals. Then, you consult with a representative to see if Doorvest is a good fit for you. Next, Doorvest finds a home that helps you meet your goals and helps you close on the purchase. They’ll complete any necessary renovations, find tenants, and manage the property on your behalf.
Doorvest does offer a couple of guarantees to help newer real estate investors feel more at ease. The first is their renovation guarantee which lasts one year from your date of purchasing the rental property. This covers any maintenance costs during the first year of ownership associated with completed renovations. The coverage is limited to $25,000 and has a long list of exceptions.
The second guarantee is a rental income guarantee. The company guarantees you’ll receive rental income for the entire first year of ownership. This can help you feel at ease that you might have the cash flow to cover your costs, even if a tenant doesn’t pay rent or breaks a lease.
Pros and cons of Doorvest
Using Doorvests comes with both benefits and drawbacks.
As a Doorvest investor, you can enjoy the following advantages.
- Work with Doorvest to find a rental property for you to purchase
- Have the property renovated on your behalf
- 12-month renovation guarantee
- Have the company find and place a tenant for you
- 12-month rental income guarantee
- No tenant placement fees
Investing money with Doorvest could have some downsides, though.
- Doorvest makes money on the property sale, meaning you may pay more than if you had purchased and sold the property independently.
- Doorvest charges a higher management fee than most rental management companies.
- Rental real estate is less liquid than traditional investments, such as mutual funds.
- Rental real estate generally has more selling costs than traditional investments.
- You own property outside of your local area, which could cause issues if you need to visit the property to rectify problems.
- Owning rental properties typically complicates your income tax return.
Who can open an account with Doorvest?
Anyone who qualifies to own real estate in the markets Doorvest does business in and who has sufficient funds can invest with Doorvest. This often means having at least $35,000 cash available to invest, a decent credit score, a suitable debt-to-income ratio, and the willingness to invest in property outside your local market.
People considering investing through Doorvest generally need to have a high risk tolerance due to the many factors that could impact returns. Home repairs, vacancies, weather events, and tenant issues could easily add up to thousands of dollars in unanticipated costs. Real estate might also fluctuate in value and isn’t a liquid asset that can be sold quickly. Selling a property usually incurs real estate agent fees, so selling costs could be expensive.
Doorvest may be a good investment option for people looking to own single-family rental properties in the Houston, Texas, area. The service could also be ideal for people who have the finances and credit to support a significant down payment and want full-service property management. However, you still likely need to check in on the property yourself from time to time to verify it is being managed up to your standards.
How much can you earn with Doorvest?
Investing in real estate comes with risks, just like investing in any other asset. Doorvest states investors receive an average annual return (AAR) on investment of 18% but doesn't explicitly state how they arrive at that number.
When you look at the math behind Doorvest, it’s easy to see where risk exists. While the monthly payment for a fixed-rate mortgage shouldn’t change, homeowners insurance and property taxes can increase. If the local market allows, rent could increase to offset these costs, but renters could also fail to pay their monthly rent. Your property might also experience vacancies. Some renters may even damage your home, resulting in costly repairs.
Real estate returns are generally location- and property-dependent, as well. Your property could appreciate and help you build long-term wealth, but its value depends on its condition, specific location, the characteristics of the home, and the real estate market. Ultimately, your returns vary based on all of these factors and more. It’s up to you to determine whether the potential gains outweigh the risks involved.
FAQs about Doorvest
Is Doorvest legit?
Doorvest is a legitimate way to invest in real estate. The company launched in 2018, currently manages over $20,000,000 of real estate for its clients. It has been funded with over $2,500,000 from venture capital investors.
How does Doorvest make money?
Doorvest makes money in two ways. The first is a management fee equal to 15% of rent payments collected. If the company doesn’t collect rent or has a vacancy, they don’t get paid. Unlike some other property managers, Doorvest does not charge a tenant placement fee. Even so, this is accounted for in the higher than average management fee the company charges. Additionally, Doorvest states they make money on the margins for their home sales. This means they buy properties, fix them up, and then sell them to you at a profit.
Which is better, Doorvest or Roofstock?
Roofstock and Doorvest both allow you to purchase rental properties, but they’re very different services. The answer to which is better for you depends on which best aligns with your goals.
Doorvest focuses on making real estate investing a simple process by helping you through the entire process, including managing your rental property for you. It charges a 15% management fee for this service.
Roofstock offers consumers two services depending on what you’re looking for. Its marketplace focuses on the buying and selling of whole rental properties but does not get involved in rental property management.
Roofstock also offers an option called Roofstock One, which allows accredited investors to purchase full or fractional shares of rental properties that are managed on your behalf. Roofstock One charges a 10% property management fee for this service, as well as an annual asset management fee of 0.5% of the home’s value.
Is real estate a good investment right now?
No one can predict whether any asset class, including real estate, is currently a good investment. An investment’s future performance is unknown. Real estate investments might also vary depending on the specific property, its location, that location’s economy, and many more factors.
It’s a good idea to evaluate a real estate investment opportunity yourself. Determine whether you think it might help meet your investment goals to decide whether it’s a suitable option for you.
How to open a Doorvest account
If you’re interested in how to invest money with Doorvest, learning about the service is the first step. Once you’ve determined that you are interested in moving forward, opening an account on Doorvest.com is likely your next step.
Opening a Doorvest account requires you to submit your name and email address. Then, you have to answer questions about your investing philosophy, employment, income, and the amount you have available to invest. Once you submit this information, you schedule a 15-minute consultation call with a Doorvest representative to move on to the next step. At the time of writing, the first available call was 16 days from the date of submitting the requested information.
Other investing platforms to consider
Doorvest won’t be the perfect real estate investing platform for every person. If you’re just learning how to invest in real estate and don’t feel it’s a good fit for you, consider investing with Roofstock or Crowdstreet.
Roofstock allows you to buy or sell whole investment properties or buy partial shares of a rental property through Roofstock One. Only accredited investors qualify to use Roofstock One, though, which typically means you need at least a $1 million net worth or over $200,000 in annual income as an individual or $300,000 as a couple. Its fee structure differs from Doorvest and could be a better fit for some investors. Learn more in our Roofstock Review.
Another option to invest in real estate could be Crowdstreet. Crowdstreet solely works with accredited investors to invest in commercial and multifamily real estate rather than residential real estate. Minimum investments are significant and start at $25,000. If you qualify as an accredited investor, you can learn more in our Crowdstreet review.
People looking for more traditional investments should check out our list of the best investment apps.