Buy shares of individual rental property while collecting passive income without operating responsibilities
If you’ve ever considered buying rental real estate, you understand the long list of challenges to overcome. Roofstock One might be an alternative to consider.
Current owners of rental properties are familiar with the headaches and hard work that goes into operating your rentals.
A new concept from Roofstock called ‘Roofstock One’ aims to sell shares of individual homes for a relatively small initial investment.
Real estate investments without acting as a property manager or landlord is not a new concept, the real estate investment trust has been around for decades, but Roofstock One and its online marketplace could change the game for many investment portfolios.
The goal is to offer residential real estate investment to a broader audience.
What is Roofstock One?
Roofstock One is a new and straightforward way to invest in single-family rental real estate. Fractional ownership allows you to diversify your investments across multiple geographic areas with small initial investments.
Roofstock is banking on smaller investors looking for ways to invest without the substantial financial commitment and hassle of property management and upkeep.
Gary Beasley, Gregor Watson, and Rich Ford founded Roofstock to lower transaction costs common to traditional real estate transactions.
The team also created a way to invest in certified, leased homes using technology to reduce friction and make the process user-friendly.
Roofstock One New Funding Round
Recently Roofstock closed on a $50 million Series D funding round. The participants in the round were some of the biggest names in venture investing. Led by SVB Capital, the syndicate included Citi Ventures, Fort Ross Ventures, and 7 Global Capital.
Prior round investors include Khosla Ventures, Bain Capital Ventures, Canvas Ventures, and Lightspeed Venture Partners. After the latest series D round, Roofstock has raised a total amount of $133 million.
Sulu Mamdani, managing partner of SVB Capital was quoted on the deal,
“Roofstock is in the vanguard of the rapidly-growing prop-tech space. As startups broaden access to financial services, we see real estate as an incredibly attractive asset class for retail investors looking to go beyond the typical stock and bond portfolio.”
How Does Roofstock Determine Which Properties to Offer?
The single-family rental market in the U.S. is estimated at $3 Trillion. There are about 16 million single-family rental homes in the U.S., and many of those owners are small investors holding only a few properties each.
The need for additional rental households over the next ten years is enormous. Roofstock developed a proprietary prediction model to analyze millions of single-family rentals and investment homes across the U.S. for investment potential.
That pool of potential properties is then curated and reviewed by the investment committee before it is underwritten and made available to investors.
Once purchased, these homes are held in trust, and then shares are issued to investors at predetermined increments.
Any investor has the opportunity to buy any number of shares or purchase the entire interest in the property.
How Do I Invest?
The first step to investing in a single-family rental property with Roofstock is searching the inventory and deciding on a location.
Currently, they offer homes in Atlanta and Indianapolis, but I would assume they have goals of expanding to other cities soon.
Roofstock’s data engine analyzes real estate, demographic and economic data from across the country to identify markets and investment options with favorable outlooks for gross rental rates.
They consider local job growth, household growth, rental rate growth, home price appreciation rates, and population growth to determine where to purchase properties.
With the Roofstock One real estate investment platform, due diligence is streamlined and organized.
Each home is rated by a neighborhood score and a property condition score.
The neighborhood rating gathers data across 72,000 census tracts, each composed of 1,500 homes, and provides a uniform view of neighborhoods nationwide based on dozens of factors.
Neighborhood ratings provide a quick way for prospective Roofstock One investors to scan for specific investment opportunities and gain confidence in achieving their specific investment goals.
Roofstock wants its interest to align with the interest of investors. They maintain a 10% stake in each property for a minimum of 1 year.
There is a minimum hold period of 6 months for any new investor. Invest in Rental Housing one piece at a time with Roofstock One.
Does Roofstock Work?
That depends. Every investment carries the risk of loss. And the real estate market is no different, no matter what you may hear.
You will never know if an investment “works” until after the investment.
A better question to ask yourself would be, “Could Roofstock make sense in my current financial situation?” If you answer yes, then continue investigating the pros and cons.
Inflation and Real Estate
One of the primary goals of real estate investors is to build wealth over the long term by avoiding the harmful effects of rising inflation.
History has shown single-family homes to be a great inflation hedge. When inflation rises, home prices tend to rise along with it.
Real estate investing provides rental income through investment properties while benefiting from rising values in the real estate market.
Do You Need to be an Accredited Investor for Roofstock One?
Roofstock One is only available to accredited investors currently. But the platform hopes to change that in the future. Rule 501 of Regulation D found in the Securities Act of 1933 defines accredited investors in two ways.
Either you have a gross income over $200,000 in each of the last two years or joint income with a spouse of over $300,000 in the last two years. You also need to have a reasonable expectation that income will continue in the current year.
Before you can invest in Roofstock One shares, you will need to apply and be verified as an accredited investor by Roofstock.
Roofstock One Reviews
You might be asking yourself how Roofstock One stacks up to the competition and how the average investor rates their experience with Roofstock One.
After scanning several real estate industry review sites, the Roofstock platform received relatively high reviews.
A few of the Pros to the online platform include low commissions and fees for home sellers and an easy-to-use interface.
Some of the Cons included an unclear fee structure for new investors and the illiquid nature of investment property in general.
As for Roofstock’s competition, they include platforms Fundrise and Realty Mogul. Of the two, Fundrise offers the lowest initial investment requirement of $10 to open a new account. And it’s also open to non-accredited investors, whereas Roofstock and Realty Mogul are not.
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