Buying real estate is often among the largest individual transactions that a person will make in their life, so ensuring that you’re working with the right tools for a successful purchase is critically important. Most are familiar with online stock broker platforms that offer low and sometimes no fee trades and other features that appeal to first time investors, but there are increasingly options online that help to navigate investing in real estate. A popular one that has received excellent reviews is Roofstock.
What is Roofstock?
In simple terms, Roofstock is a low fee investment platform geared towards helping investors purchase single family homes with the goal of obtaining rental income. It also offers other services to simplify what can be a large and complex transaction, such as detailed pre-purchase home inspections and property management services once you’re the owner.
Anyone who has been involved in a real estate transaction before knows that fees and commissions can eat into the pot of available money very quickly. Here, Roofstock’s straightforward and relatively low fee structure should hold some appeal.
Buyers pay a fee of 0.5% or $500 (whichever is higher), which includes securing financing, a property manager and insurance. Sellers pay a bit more, the higher of 3% of sale price or $2,500, but they get quite a bit for this – it includes all of the marketing needed for the sale and addressing any legal issues that need to be sorted out with tenants occupying the home at the time of sale. While it may seem like a lot, keep in mind that many conventional real estate brokerages charge more. For example, in Texas real estate fees average 5.7%. If you’re interested in taking advantage of the lower fees, consider signing up for Roofstock today.
For those not quite able to purchase an entire home, Roofstock offers an additional service called Roofstock One that lets accredited investors (those with a high income or net worth over $1 million) buy shares in properties with a minimum investment of $5,000. It also partners with a platform called Lennar to allow purchasing of pre-construction homes.
Is Roofstock Legit?
It’s understandable to want to ask questions before buying bricks and mortar real estate with an online platform. Fortunately, Roofstock has a good track record – it has been around since 2015 and has accumulated terrific online reviews. There’s no question it is a legitimate and secure investment platform.
In addition to the safeguards that we have already talked about, such as streamlined home inspections, Roofstock also offers a couple of other policies to protect investors. There’s a 30-day money-back guarantee in case you get cold feet after your purchase. The “Lease Up” feature protects against lost rental income. If your property goes without a tenant for 45 days, Roofstock will pay for 75% of market rent for up to a year.
Roofstock’s Competitors: Worth a Look?
Given how many options there are to invest in stocks and other assets online, you can be sure that Roofstock’s not the only game in town when it comes to real estate investing. Two others worth thinking about are Fundrise and RealtyMogul. An additional platform we’ll consider is HomeUnion.
Fundrise is a platform that allows for investing in Real Estate Investment Trusts (REITs) and crowdfunded fractional ownership of commercial properties. You can get started for as little as $500, meaning it is significantly more accessible to investors than a single family home bought through Roofstock. Higher levels of investment, starting at $1000, $10,000 and $10,000 allow for more targeted investments based on your specific preferences and strategy. Although Fundrise does not enable the purchase of bricks and mortar real estate, funds invested with it are quite illiquid, which is one of the downsides traditionally associated with owning a property.
RealtyMogul offers exposure to the commercial real estate side of things. It takes your minimum investment of $5,000 and works with various developers and sellers to enter into good deals. It also offers two REITs, one geared strictly to commercial property and the other to apartment complexes and other multi-unit housing arrangements.
Unlike Fundrise and RealtyMogul, which cater to different segments of real estate investors, HomeUnion offers more direct competition with Roofstock. It allows for the purchase of residential properties, including single family homes and multiplexes. It offers a property management service for a fee of 10.5% of the monthly rental income, but unlike Roofstock does not typically sell properties with a pre-existing tenant, posing a greater risk that your property could sit vacant without any income for you. While there are definitely tools out there to help you find a tenant, it is easier to buy a property with a tenancy already established.
Of course, it’s also an option to pursue what’s known as For Sale By Owner (FSBO) but you need to be very careful to follow all the proper steps and applicable local rules
Is Roofstock the Right Choice?
Investing in real estate is a huge decision. Beyond understanding all the hidden fees and extra costs of homeownership, it’s a significant financial and time commitment. New online tools and platforms offer a great way to cut out some of the administrative overhead and simply enjoy your rental income. While there are a variety of choices out there to suit investors, Roofstock’s simple fee structure and built-in streamlined features make it a great starting point if you think real estate investing might be for you.