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. 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. 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 makes it possible 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 intending 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.
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 continue to 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 an estimated $3 Trillion. There’s about 16 million single-family rental homes in the U.S., and a large percentage 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 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 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.
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.
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.