Real estate investing has long been seen as an exclusive opportunity for well-connected or well-off individuals. But with the rise of fintech companies, opportunities to learn about how to invest money in real estate are becoming more accessible for everyone. Even better, you don’t need a lot of money to get started.
With Roofstock, you can get started in real estate investing with as little as $5,000 and without any operating responsibilities. You won’t have to sign tenants or make expense decisions on a day-to-day basis, which means truly passive income for you.
In this Roofstock review, we’ll cover the ins and outs of Roofstock and whether it could be a good fit for you.
Build wealth through real estate investing without the hassle of property management.
- Simple investing in single-family rental properties
- Make informed decisions with insights, proprietary data, and market-forward technology
- Cost-effective strategies, low fees, and fractional shares let you get started with a minimal investment
What is Roofstock?
Roofstock is an online real estate investing marketplace that focuses on single-family homes. Through its platform, you can buy or sell real estate, and you can also invest in shares of real estate properties.
The company was founded in May 2015 by Gary Beasley, Gregor Watson, and Rich Ford. All three founders combined their individual investing and real estate experience to create a company they hoped would change the real estate investing industry. Their goal was to build a real estate investment marketplace that was “radically accessible, cost-effective and simple.”
The Roofstock online marketplace was launched in October 2016 and by July 2017 the company had surpassed $1 billion in transactions. As of December 2019, Roofstock has expanded to more than 70 markets, ranging from California to Florida to New Jersey. It now has more than 200 employees (known as Roofsters) and has surpassed $2 billion in transactions.
|Minimum investment||Varies by project|
|Asset classes||Single-family rentals|
|Account types available||Individual properties, tailored portfolios|
|Features||Can choose projects based on list price, location, estimated yield, and more|
|Distributions||Varies by project|
|Best for...||People looking to get started in real estate with single-family rentals|
How does Roofstock work?
Roofstock makes it easy for first-time investors to get started in real estate. Yes, you can also sell properties with Roofstock, but its investment options are the real, innovative draw. Its platform makes it simple to start investing in turnkey real estate and earning money.
Every Roofstock property goes through a certification process before being listed on the site. As part of this process, the Roofstock team arranges a home inspection; prepares a valuation report and rental market analysis; analyzes tenant payment history, lease terms, and disclosure reports; and estimates the cost of any major repairs. While Roofstock's vetting process can offer some peace of mind, it's still important to do your due diligence before you invest.
If you're ready to get started, head to the main Roofstock website and click “Buy,” you’ll be brought to the online marketplace. Here, you can choose to view listings under properties, portfolios, and property shares.
- Properties are for purchasing whole properties as an investment.
- Portfolios are for purchasing multiple whole properties.
- Property shares are for purchasing fractions of a property.
Note: You have to be an accredited investor to participate in Roofstock One, which is the property shares portion of Roofstock. For its whole properties, you don’t have to be an accredited investor. An individual accredited investor is typically someone with a high net worth and/or income.
Investing in these three areas is similar, so we’ll take you through one process to give you a feel for all three. If you are a beginner to real estate investing, buying fractional shares in properties may be the most accessible and affordable investment option for you so let’s go through that process.
Here are the four steps for buying fractional shares as illustrated by Roofstock:
Let’s walk through each of these steps in more detail.
1. Find a property
Roofstock’s online marketplace provides an easy-to-use interface for browsing available real estate investment opportunities. You can filter the results by location (markets), minimum investment amount, neighborhood rating, property condition, and more. Roofstock operates in many rental markets in a number of different states, including Alabama, Arizna, California, Florida, Georgia, and Texas. Pricing can vary based on several factors, but expect to see list prices from less than $100,000 to over $900,000.
If you find a property you’re interested in, you can click on it and get a detailed rundown of the investment opportunity. You’ll see multiple photos of the property (both interior and exterior), its title report, property inspection report, valuation report, total home price, share price, and the estimated return on your investment — shown as the target annual distribution. It also offers a calculator that estimates your closing costs and lets you view how your down payment amount might impact your returns.
There’s no guarantee on this estimated return as all investments are risky. However, the target annual distribution is calculated based on expected rent income minus estimated expenses, reserve payments, and loan payments. The dollar amount projected is your portion (number of shares) of the total target annual distribution.
2. Select shares and reserve
Once you’ve decided on a property, you’ll need to choose how many shares of that property you want to purchase. You’ll find a small area to the right of the photos where you can start your reservation. A reservation is simply laying your claim to however many shares you choose of what’s still available. You have to pay a refundable (within 24 hours) fee to reserve your shares.
If you see an “ALL SHARES SOLD” block of text, it means there are no shares available for purchase and you won’t be able to invest in the selected property. Otherwise, you can select your number of shares and add them to your cart.
3. Sign and invest
Once you add investments to your cart, you can view your cart and checkout. At this point, you’ll have to go through a few steps to complete the reservation and finish the investments. If you're financing your investment, you'll have the option to upload a pre-approval letter. You'll also need to add your credit card information to pay Roofstock's .5% marketplace fee.
After you’ve paid the marketplace fee, you’ll need to verify your identity and accredited investor status with the proper documentation. Then, it’s onto signing the subscription agreement and funding your investment with an ACH transfer.
4. Earn passive income
With your investments funded, it’s time to sit back and enjoy the cash flow coming in from the tenants renting out your investment properties. When you invest in Roofstock’s fractional shares, you’re freed from the time-consuming hassle of being a property manager. Instead, an in-house team of professionals takes care of property and asset management.
If you’re looking to purchase entire properties, Roofstock isn’t the only option for purchasing rental real estate of course. You could work with a real estate agent to buy and sell properties, but they likely couldn’t beat Roofstock’s prices. Compared to the typical 6% realtor fee, Roofstock’s fee is much lower at $500 or .5% of the purchase price. And if you sell a property with Roofstock, you’re only looking at giving up 3% of the sale price or $2,500 (whichever is greater).
The best part? You can invest in properties around the nation, no matter where you live. This opens up the number of real estate opportunities available to you and makes it easy to find rental homes you like.
Who can use Roofstock?
You can sign up for a free Roofstock account and start participating immediately. You don’t have to be an accredited investor to purchase whole properties with Roofstock. If you want to participate in Roofstock One, which is Roofstock’s fractional shares investment program, you do have to be an accredited investor.
Accredited investors can include individuals with high net worths, lenders, trusts, businesses, and more. If you have the money to invest in whole property purchases, you may already qualify to be an accredited investor as an individual. Roofstock will verify your accredited investor status once you initiate the investment process. If you don’t know whether you qualify, review the federal rules and regulations.
How much can you earn with Roofstock?
Your earnings can vary dramatically depending on multiple factors, including:
- Expected rent: The expected amount of rent to be charged to tenants living in the real estate property.
- Expenses: Expenses can include leasing fees, repairs and maintenance, insurance, and more.
- Property taxes: Your annual taxes based on property location.
- Loan payments: The payment amount if the property is being financed.
Roofstock analyzes these and other factors to determine an estimated target range for how much you might earn on a real estate investment each year. There’s no guarantee you’ll make money with real estate investments. Still, Roofstock takes a lot of the guesswork out of the equation. It forecasts the situation to the best of its ability and provides you with sufficient information to make an informed decision. Its expertise is what has allowed it to grow and reach more than $2 billion in transactions since its founding.
However, as with any investment, there’s always risk involved. Although Roofstock can generally analyze what your return on investment could be, it can’t account for economic conditions, changes in laws, or future damage or destruction of property.
Along with the inherent risks, expect your real estate investment earnings to take some time. Many investments take years to pay off, and real estate investments are no different. Let’s take a look at two properties listed in Roofstock’s website.
This property costs $105,500 and, according to Roofstock calculations, would return a total of $87,046 over a period of five years. At that rate ($87,046 / 5 = $17,409.20), it would take about six years ($17,409.20 x 6 = $104,455.20) and you’d have earned your money back. So after six years, you’ll start earning profit.
For this fractional shares property, each share costs $6,604. The target annual payout is 6.6% ($439) and the target five-year return is 11.9% ($4,132). To get your money back and start earning a profit, you’d need to stick with this investment for longer than five years.
How you get paid with Roofstock
Getting paid when using Roofstock is simple. For fractional share properties, investors receive quarterly distributions on the 15th day of February, May, August, and November.
If you purchase a property through Roofstock, you can start collecting rental income as soon as you’ve closed on the property. How you get paid depends on how the property is being managed.
You can manage a property yourself, find your own property management company to work with, or let Roofstock find a property management company for you. Then you set up your preferred method of payment with your renters or through your chosen property management company.
How to stay safe investing with Roofstock
The real estate market is typically much safer than the stock market. Stocks are often volatile, meaning their prices can change from one second to the next, and dramatic drops are more common. With real estate, the prices typically take longer to change and dramatic drops don’t happen as often.
With Roofstock, you get additional security in the form of Roofstock's satisfaction guarantee. If you aren’t satisfied with your purchase in the first 30 days, you can get a refund from Roofstock. It’s generally unheard of to get refunds on property purchases, so this is a huge deal.
Also, if you purchase a rent-ready Roofstock property that doesn’t already have tenants (and you or your property management team can’t find tenants), Roofstock will pay you the rent. This is to guarantee you always have rent coming in, even if there’s nobody living in the house.
Note: The rent guarantee isn’t available for Roofstock One properties (fractional investments) or properties within Roofstock portfolios (multiple whole properties you purchased within a Roofstock portfolio opportunity).
Overall, there is no guarantee when it comes to the risk involved with real estate investing and you should always do your due diligence when considering any investment. If a property loses value or is somehow damaged, you may lose money. Real estate investing is generally safer than investing with stocks, but there are still no guarantees.
FAQs about Roofstock
Is Roofstock safe?
Investing in real estate with Roofstock is as safe as investing in real estate in general. The real estate market is typically considered safer than the stock market, but that doesn’t mean there aren’t risks. Your real estate investments may not pay out how Roofstock experts predict them to, or they may make more money. However, Roofstock’s predictions are well-informed and based on existing data, so it’s a thorough analysis.
Roofstock also offers guarantees. If you purchase a property through Roofstock, you have 30 days to start a refund process. In addition, if one of your rent-ready properties has no tenants, Roofstock will pay your rent (terms apply). These can offer some protection to homeowners.
How does Roofstock make money?
Roofstock charges a marketplace fee to buyers and a commission fee to sellers. For buyers, you pay $500 or .5% of the purchase price (whichever is greater). For sellers, you pay $2,500 or 3% of the sale price (whichever is greater). These fees are typically much lower than the average 6% realtor fee.
Roofstock One (fractional shares) collects money by charging a property management fee of 10% of the gross rent and other income. There is also an asset management fee of .5% of the home or interest price. This fee is calculated annually, but charged quarterly.
Is Roofstock a good investment?
If you want to get into real estate investing, Roofstock has a simple and easy process. To purchase whole properties, you don’t need any sort of real estate experience or accreditation. You can browse listings from around the country and choose properties you like. Then you can use Roofstock to set you up with a property management company or choose your own property management company.
After that, you have the potential to earn passive income from day one and for as long as you hold onto the property. So if you have some money to spare (Roofstock properties can range from less than $100,000 to more than $900,000) and want the possibility of passive income, you might consider investing with Roofstock.
Note: Investing in fractional ownership with Roofstock requires you to be an accredited investor.
How to sign up for Roofstock
Signing up for Roofstock is quick, free, and easy when you follow these steps:
- Head to the Roofstock website.
- Click on the “Sign Up” button.
- Enter your information, including full name, phone number, email address, and password.
If you need to prove you’re an accredited investor for Roofstock One properties, you may need certain documentation showing your income, like:
- Form W-2
- Form 1099
- Schedule K-1 to Form 1065
- Form 1040
Other real estate investing opportunities to consider
If you’re interested in real estate investing without buying property, you could also check out real estate crowdfunding platforms like Crowdstreet, Diversyfund, and Fundrise. With Crowdstreet, you can easily invest in commercial real estate properties around the country through Crowdstreet’s online marketplace.
Or, you can become a real estate investor straight from your phone using the Diversyfund mobile app, one of the best investment apps available. Diversyfund allows you to use its real estate investment trust to invest in real estate without actually managing any properties. Its Growth REIT properties include multifamily developments and complexes throughout the nation. You can start investing in them with as little as $500.
Fundrise allows you to invest in real estate for as little as $10, and it's structured slightly differently than Crowdstreet and Diversyfund. With Fundrise, investors can choose to invest in eREITs focused on commercial real estate or eFunds focused on residential real estate.
These investment opportunities are different from Roofstock because they focus on different types of investments. Roofstock offers only single-family rental homes and is a good potential fit if you're looking for turnkey investment properties.
If you’re wondering how to invest money in real estate, learning more about how apps like these work can help you start your journey.