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Roofstock is an online marketplace for property. The company is based in California and despite being a relatively new startup that has only been around since 2015, the platform has already established itself as a top financial services provider. Roofstock specializes in investent properties, meaning that you can buy properties that already have tenants renting the, saving you some hassle.
- Low commission fees – the platform charges just $500 or 0.5% of the contract price (whichever is higher) on all properties transacted on the platform.
- 1000+ properties you can choose from – the platform offers a wide selection of investment properties, many of which are already rented out to tenants.
- Fast transaction times – closing can take place within 15 days for cash purchases or within 30 days if you are paying for the property with financing.
- Relatively low financing fees – Roofstock works with preferred lenders to offer investors fees of as little as 3.49% on loans for property buyers.
- High minimum investment – the minimum sum you must invest with Roofstock is $5000, making it not very suitable for novice with lower capital.
- Illiquid investment – if you want to cash out on your property, it can take anywhere from 2 months up to a year to find a buyer and sell it.
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What is Roofstock?
Roofstock is an online marketplace where real estate investors can easily buy and sell properties.
What makes the platform most appealing to many investors is that it focuses on single-family homes that already have tenants. This means, when you buy a house, there are already tenants in it, enabling you to immediately start earning rental income after you close the deal.
Moreover, properties on Roofstock marketplace are already inspected and certified so you don’t have to go through the hassle yourself.
Note that Roofstock is not a real estate crowdfunding platform where you pool your money with other investors and buy only a fraction of the properties. With Roofstock, you’re buying the entire home and holding the direct title to your property.
And the best thing about Roofstock is that you don’t need to be holding an investor accreditation to use Roofstock services.
Roofstock Features: How Does Roofstock Work?
A marketplace by Roofstock is a place where you can buy or sell a rental property with tenants that generates rental income as soon as you close the deal on the house.
In fact, you can buy/sell following assets on the Roofstock marketplace:
- Property shares
Roofstock Property Management
Selecting the property management feature, Roofstock will connect you to their world-class property managers.
These property managers enable you to generate passive rental income while you sit back, enjoy life and avoid any hassles that are connected to being a landlord.
Roofstock One is a full-service investment option that enables you to invest in real estate and get a passive income. And what’s best about this feature is that it doesn’t require any management on your part as the company does it all for you.
Benefits of Roofstock One:
- Minimum investment of $5,000
- Completely passive income without operating responsibilities
- Ability to buy 1/10th shares of single-family
- Diversity across multiple properties
- Roofstock managers handle all operational responsibilities
However, Roofstock One is only available to accredited investors, meaning you need to have annual personal income of at least $200,000 or a joint income of $300,000.
Roofstock One comes with an annual asset management fee of 0.5% of the home price and property management fee of 10% of gross rent. Your money will also be allocated to a reserve fund to pay for repairs, insurance and taxes.
Roofstock 1031 Exchange
At its roots, 1031 Exchange allows you as a real estate investor to swap one investment property for another and defer capital gains taxes if IRS rules are met.
In other words, Roofstock 1031 Exchange lets you buy a property that already has tenants and enjoy the rental income pouring into your pocket as soon as you close the deal.
Roofstock helps you by:
- Guiding throughout the entire process of closing the deal
- Identifying the quality replacement investment portfolios
- Assisting you in selecting the best property management partners
- Referring qualified intermediary partners to facilitate your transaction
- Referring the best lending partners to provide you with the right loan solution
- Providing an inventory of stabilized properties ready for purchase
Roofstock IRA Investing
Roofstock enables you to buy and hold investment properties in your Individual Retirement Account – IRA.
Partnering with the New Direction Trust Company, Roofstock helps you grow your IRA. The New Direction Trust Company handles the administrative and custodial role of your IRA so that it can purchase real estate and keep the tax advantage of a retirement account.
And the way IRA investing works with Roofstock is simple:
- Open and fund your IRA with New Direction Trust Company
- Find your property on the Roofstock marketplace and select your favorite
- Diversify your IRA portfolio across multiple properties
Roofstock Returns: How Much Return on Your Investment Can You Expect?
Roofstock provides estimated returns for each property that is on sale through the platform. Most of the properties project a cap rate of 5% to 8% and a gross yield ranges from 7% to 19%.
You can also see a projected appreciation for each listing as well.
Is Roofstock Legit?
Roofstock has been on the real estate market since 2015 and been operating legitimately ever since. Since its launch, Roofstock has facilitated over 2+ billion in transactions on their marketplace.
Moreover, Roofstock holds a B+ rating on the Better Business Bureau, but it’s not accredited by the BBB.
Roofstock Fees & Pricing
The Roofstock marketplace is completely free to use, allowing you to browse and make offers for free.
But if you buy a house through Roofstock, you’ll be charged a fee of 0.5% of the purchase price or $500, whichever is greater. For example, on a $100,000 house, you’ll be paying $500 in fees.
It’s noteworthy to mention that this fee is much lower than traditional realtor commission fees, which is typically 6%. So with a traditional realtor, you’d be paying a $6,000 commission fee on a $100,000 house.
When it comes to selling your property, you’ll be paying a 3% fee of the sale price or $2,500, whichever is greater.
Let’s compare Roofstock fees to traditional brokerage fees:
|Lost rent while property for sale (3 months at $1,200/mo)||―||$3,600|
|CapEx to prep for MLS sale (2%)||―||$2,000|
|Brokerage fees (6% of sale price)||―||$6,000|
|Roofstock fees (3.0% of sale price)||$3,000||―|
As you can see from the table above, Roofstock allows you to save $8,600 in fees, compared to using a traditional brokerage service.
30-Day Money-Back Guarantee
If you’re not satisfied with the property you’ve bought through Roofstock, you can notify the platform within 30 days of closing.
Roofstock will relist your property on their marketplace free of charge. And when the property sells, you’ll get your money back, regardless of the sale price of the property.
In case your property doesn’t sell within 90 days, Roofstock will buy the property from you giving you a full refund.
Note that your property must be returned in the same condition you’ve purchased it in, meaning you’re responsible for maintaining the property until it sells.
What Happens if Roofstock Goes Bankrupt?
Note that the properties you buy through Roofstock are in your ownership. This means, if Roofstock were to go baknrupt, it would have absolutely no effect on your ownership if you’ve already made a purchase through Roofstock.
However new purchases may be slightly affected as company operations would be transitioned to a qualified third party.
Roofstock Pros & Cons
- Lower-cost way to purchase rental properties
- Option to Invest in real estate properties already with tenants
- Over 500 new transactions a month
- Open to non-accredited investors
- $5,000 minimum investment
- Real estate is an illiquid investment
Roofstock vs. Fundrise
Fundrise is a good alternative to Roofstock for many real estate investors, especially the beginners, because of its low minimum investment of $500. It’s a crowdfunded investment platform, enabling you to buy shares of properties and diversify your investments across your portfolio without actually owning them.
On the other hand, Roofstock gives you an opportunity to own the properties along with other more advanced features than Fundrise offers.
There are also differences when it comes to platform fees. While Roofstock has no annual fees, Fundrise charges you 1% management fee annually.
Roofstock vs. Zillow
Zillow is one of the largest real estate marketplaces in the United States and a great alternative to the Roofstock marketplace.
However, even though Zillow has many useful features, it doesn’t offer you any investment opportunities, IRA or 1031 Exchange like Roofstock does.
Roofstock vs. Home Union
Home Union is a popular real estate marketplace where you can buy or sell properties. But unlike Roofstock, the properties don’t come with tenants, meaning you need to find them after you purchase your home.
Moreover, Roofstock offers you a 30-day money back guarantee if for any reason you’re not satisfied with your purchase. But Home Union doesn’t offer any returns.
Is Roofstock a Good Investment?
Considering the fact that Roofstock gives you an opportunity to buy or sell rental homes with tenants in them, I’d say it’s totally worth using the platform.
Not only buying the home that comes with tenants in it saves you time and hassle, you can actually enjoy the rental income pouring into your wallet as soon as you close the deal and sign the title.
Plus, selling the home that already has tenants is highly appealing to potential buyers, increasing your chances of selling fast.