The Modest Wallet is a free digital publication delivering its readers simple personal finance solutions. We regularly partner with brands that have products and services that will help our readers. Some of the links in this post are from our partners. How we make money.
Real estate investments provide outstanding returns compared to other asset classes. The problem is that it’s historically been a hard market to buy into. But now, beginner investors who want to get into real estate have options. One of those options is Roofstock. Learn more about this service in our Roofstock Review.
Quick Summary: Roofstock is an online marketplace for investing in single-family rental properties. They provide research, analysis and evaluation of their listed properties to make it easier for people to invest in rental properties across the U.S.
What is Roofstock?
Roofstock is a turnkey platform for buying and selling single-family rental homes. Simply put, it’s a marketplace for beginner real estate investors to invest in rental properties without being an accredited investor.
The properties listed on Roofstock are all screened, appraised, and certified independently. This helps users (investors) get a complete picture of what they’re buying.
One of the interesting benefits of Roofstock is that it is set up to create cash flow from the start. The listed properties already have tenants living in them, so they have already proven to be profitable. Roofstock simply matches investors with these profitable rental properties.
The platform is a turnkey online marketplace. This means that it’s meant for busy individuals who want to make money in real estate but aren’t real estate professionals. So, Roofstock is meant for those without real estate experience.
How Does Roofstock Work?
There are two ends to the Roofstock marketplace: the property and the investor.
All Roofstock properties meet certain core requirements. As discussed, they must be single-family, rental properties. Furthermore, they must be occupied by paying tenants.
Roofstock’s team, comprised of experienced real estate professionals, finds properties they want to invest in. These professionals work with large real estate investment trusts (REITs) to source high-quality single-family properties.
REITs buy, manage, refurbish, and eventually sell hundreds and even thousands of properties. The process of selling a property (such as a single-family property) can be very costly and time-consuming for some of these REITs. This is where Roofstock comes in, as they work directly with large holding companies to help them certify, document, and price these properties for them. This reduces the holding companies’ overhead and allows Roofstock to list its properties for a lower price.
Of course, this process requires a lot of trust when the U.S. is plagued by real estate scams. Selling a property in a distant location requires a detailed certification process, and this is Roofstock’s first and most important job. The process includes:
- A property inspection conducted by a trusted professional inspection company.
- A property valuation.
- A full title report.
- A full review of lease terms.
- A background check for tenants.
- A 3D virtual tour of the property.
- A full home disclosure report.
- … And more.
The full process is complex, and we can’t fully cover it in this Roofstock review. What we can tell you is that the Roofstock team is very professional. They also offer 30-day money-back guarantees.
After finding and preparing these properties, they move on to the next phase.
At this point, Roofstock lists the rental properties for its users, and customers can choose from a wide selection of properties. But the company’s features and services don’t end there.
Free to Join
Account Fees Buyers
0.5% Purchase Price
Account Fees Sellers
3.0% Sale Price
Single-family rental properties
Account Types Available
IRA Investing, 1031 Exchange
Search for Rental Properties
The first thing you’ll want to do on Roofstock is browse through their rental properties. You can conduct searches on Roofstock by punching in your desired variables. These variables include:
- The property’s location.
- … And more.
After you’ve provided the details for your ideal investment, Roofstock will give you a few options. (Each of these options have passed Roofstock’s certification process and meet their criteria.)
Analyze Rental Properties
After you’ve been matched with a few options, you can compare rental properties. At this point, Roofstock has already appraised the property, conducted a title search, and conducted an investigation. So there will be no nasty surprises with the properties you can see.
Appraisal and title searches are common features with companies like Roofstock. But what sets Roofstock apart is its investigations and reports on properties. Roofstock’s investigations are thorough, and they typically produce reports over 10 pages long. These reports detail all necessary information and include pictures and additional descriptions where necessary. They want to avoid any post-purchase complaints, and they do a great job of ensuring accuracy and consistency.
Make an Offer On Rental Properties or Buy Now
Once you choose a property, you will be moved to the “checkout” area. You can choose to buy the property right away by simply clicking “buy now.” Alternatively, you can opt to negotiate by simply clicking “negotiate.”
If you opt to “buy now,” the property you’ve chosen will be removed from the Roofstock platform immediately. That property will be reserved for you and a representative will give you a call and help you complete the purchasing process.
Choosing the “negotiate” option can end similarly. But before the property is reserved, you will be able to send an offer. After you do, you just have to wait and see if it’s accepted.
List Properties for Rent
You can also use Roofstock to sell your rental properties. If you choose to, you will be on the other end of Roofstock’s process. So they will need to do their due diligence by executing all of the steps discussed above. But the company is very professional and strives to make this process easier for sellers and buyers alike.
The listing process for Roofstock is fairly simple, but it takes some time. They will want to evaluate your property first and then come to an agreement that is the most balanced for you, them, and the buyers.
Next, Roofstock brings all the parties together and ensures that the tenants are aware of the steps of the process that will affect them. They will also ensure that the tenants’ lease is honored during the transition.
Then, Roofstock will investigate the property and start collecting the information it needs. They will ask you for all relevant information, and they’ll make a 3D model of the property for potential buyers. Finally, they’ll use the information they gather to certify and list your rental property.
Roofstock Commissions & Fees
Now that we’ve gone over their process from both sides of the transaction, let’s look at how Roofstock makes its money.
Roofstock is free to join. You don’t need to be an accredited investor to sign up. The platform is very inclusive.
Roofstock’s fees are lower than standard realtor fees. However, when you’re buying a property, you will have to pay all the usual fees. These include:
- Title insurance fee.
- Closing fee.
- Recording fee.
The main costs of Roofstock are in the form of commissions. They collect them through a fee of either 0.5% of the property’s value, or $500, whichever is higher. This fee is charged once you agree to buy the property, and it secures your purchases.
What About Sellers?
Sellers have to pay higher fees than buyers on Roofstock. The seller has to pay a fee of 3% of the property’s value, or $2,500, whichever is higher.
Financing Your Purchases
Of course, real estate investments aren’t cheap. While you are encouraged to use your own funds when you can, that’s often impossible. So you can either get a loan on your own, or you can get one from Roofstock.
Roofstock gives loans to eligible buyers on its platform. They will provide loans to borrowers they deem creditworthy enough to borrow money for a purchase. This decision is at Roofstock’s discretion and they’ll take your credit score and the size of your purchase into consideration.
Getting your purchases financed takes a few extra steps. They will need to see your financial details, just as any other lender would. (Keep in mind that they will still want a large down payment if you choose to finance your purchase.)
What Properties are Listed on Roofstock?
Roofstock has specifications for the properties they list on their site. They will only list single-family rental properties due to their performance, which has historically been less affected by the stock markets.
Roofstock works with partners to make sure their listings meet their quality standards. They aim for the sweet spot where low property values but high rent prices exist.
How Much Money Can You Make?
You can make a good side income with Roofstock if you have the initial capital to invest in a property. The exact amount you can make depends on the total rent income you receive. Then, you have to subtract the costs of your debt, if applicable. Lastly, you have to factor in all other expenses.
There is always risk in any investment. But if the risk does not affect you, you should make a 3%-8% return. Exact returns will be determined by the following expenses:
- Purchase price.
- Down payment.
- Maintenance costs.
- Property taxes.
- Property management (usually a fixed percentage of rent).
- Homeowners association fees (where applicable).
First, just add up the total sum of your rent. Then, subtract the sum of all the applicable expenses listed above.
Rent income – expenses = investment income
What is Roofstock One?
Roofstock One is a service offered by Roofstock. It allows you to invest in shares of rental homes.
The benefit of Roofstock One is that you have no managerial responsibilities for your investment — It is a completely passive investment. You can choose when to sell your shares.
Of course, shares in Roofstock One don’t provide you ownership of a property. And you need to invest at least $5,000 to take part. However, Roofstock One does still help you get into real estate investing with their lower bar of entry.
Who is Roofstock for?
Roofstock is for anyone who wants to get into real estate investing but doesn’t have enough time to do their own due diligence.
Real estate is hard to get into without a lot of free time. The intricacies of becoming successful in real estate take time to grasp. But these intricacies are what the people at Roofstock do for a living. So if you want to dabble in real estate investing, Roofstock is a great tool. They allow you to take part in the process without taking long trips to investigate properties. You also won’t have to take the time to make sure all parties are satisfied — another task the people at Roofstock do professionally.
Who is Roofstock Not For?
Roofstock is a great option for side income. But it won’t work for you if you want to really dive into the real estate industry.
Real estate professionals won’t find Roofstock very useful. The platform is meant as a bridge that property owners and individuals can use to get a piece of the real estate market. It’s a platform offering a service that is simple from the users’ points of view.
Lastly, Roofstock isn’t available in every state. Make sure your location is serviced before trying out Roofstock.
Alternatives to Roofstock
Roofstock isn’t your only opportunity to take part in real estate investing. If Roofstock isn’t available to you or isn’t exactly what you’re looking for, you can try these alternatives.
Realty Mogul is a real estate crowdfunding platform. The platform connects real estate investors, sponsors, and borrowers. The real estate capital marketplace offers an alternative to traditional real estate funding that also benefits investors.
Investors can use Realty Mogul to invest in a range of commercial real estate. The platform is also very easy to use.
Compared to Roofstock, the investments that Realty Mogul facilitates carry more risk. Commercial real estate is a high-risk, high-reward game.
Lastly, Realty Mogul isn’t as easy to take part in as Roofstock. You must be an accredited investor with an annual income of at least $200,000, or a net worth of at least $1 million to make non-REIT investments.
Fundrise is another commercial real estate crowdfunding platform. They allow users to start making money through real estate investing with a few hundred dollars.
The initial investment requirement for Fundrise is only $500. But with $1,000 or more, you are given their Core Portfolio services.
Fundrise, when compared to Realty Mogul and Roofstock, offers a diverse portfolio —but it also charges less predictable fees. However, their rates are still similar to their competition. And they also have a very low bar of entry. Learn more about Fundrise in our full Fundrise review.
Free to Join
0.5% purchase price
Single-family rental properties
IRA Investing, 1031 Exchange
Free to Join
1.0% per year
Free to Join
1.00% – 1.50% per year
Real estate equity
IRA Investing, 1031 Exchange
Pros and Cons of Roofstock
- You can own real property.
- Low bar of entry (non-accredited investors welcome).
- Low commissions.
- For non-accredited investors.
- Turnkey model.
- Long-term investments only.
- A higher level of responsibility for real estate purchases.
- Significant down payments.
Roofstock Frequently Asked Questions
We’ve found some of the most frequently asked questions about Roofstock, here are our answers:
Is Roofstock Legit?
Yes, Roofstock is a legitimate company. The company isn’t incredibly popular, so they are not yet listed on the Better Business Bureau website or Trustpilot. Online reviews of the company are mostly positive. The only significant complaints are around transaction issues, but Roofstock seems to have addressed them.
How does Roofstock make money?
Roofstock makes most of its money from commissions. Apart from that, they make some money from the other fees associated with their services. The most significant charges are the commissions they charge buyers and sellers, with selling fees being significantly higher than buying fees.
Is Roofstock safe to use?
Roofstock is not as safe as traditional real estate investing options. You will perhaps experience more risk when it comes to your investments, but possibly more rewards.
When it comes to the safety of your information, Roofstock is safe. They use digital encryption technology to protect your personal information. Your personal and payment information is safe with them as long as you keep it on their platform and don’t share it with others.
How do you get paid?
You start collecting rent payments right away on leased properties. Tenants that pay their rent on time are the source of the income you make on the Roofstock platform, so your payment relies on them more than anything else.
What makes Roofstock unique?
While Roofstock is like other, similar platforms, it is unique in a few ways.
Roofstock offers a path to turnkey investments, into a very specific market; single-family U.S. rental properties. In doing so, Roofstock offers a less risky investment option into the market for a global user base.
As part of their rental real estate investment offering, Roofstock handles all of the managerial tasks. So, you can jump into real estate investment in a limited capacity, but with few responsibilities of your own. No other company or platform offers this service in exactly the same way Roofstock does.
Roofstock Review Summary
Roofstock is an interesting platform. It provides its users with exactly what it offers: a simple way to make money in real estate. They provide it on an easy-to-use platform, with a simple process for buyers and sellers alike.
Roofstock isn’t the best or safest way to invest in real estate. But it’s a good tool for beginner investors to make some extra money. Because they don’t require you to be a certified investor, they have a relatively lax set of requirements.
If you want to take a shot at real estate investing, you can check out Roofstock now.
Get our free Stock Market Playbook to learn how to invest your first $500 in the stock market.
Plus our best money tips delivered straight to your inbox.
Ricardo is an entrepreneur, investor and personal finance nerd who enjoys spending time with his family and friends, travelling and helping others achieve their financial goals. Ricardo has been quoted as a personal finance expert in several online publications, including Healthline, Bankrate, GOBankingRates, MSN Money, Yahoo Finance and USA Today.