Roofstock turns rentals into remote investments

The real estate asset class is viewed by many investors as a more stable alternative to volatile stock markets.

Until recently, however, investors who wanted to buy a single-family home for rent had limited options as they could usually only consider properties within a reasonable driving distance that they could physically visit.

Property management is, after all, a very practical task. It’s not just about collecting rent on a weekly or monthly basis, but also maintaining the house and taking the time to find tenants, check their background and make sure they don’t trash. the place. This can take hours, hence the need for single family home investors to find local opportunities.

A startup called Roofstock aims to change that reality, allowing investors to buy and rent homes from anywhere in the country while radically simplifying the property management process through digitization.

Roofstock has created a rental property market for sale and ranks each listing based on a “neighborhood score” which calculates the potential profitability of an investment, including whether or not there is a tenant in place.

In an interview with PYMNTS, Roofstock CEO Gary Beasley said his company’s main achievement has been to break down geographic barriers for real estate investors, making it easier to buy and rent a home across the states. -United.

“When you look at the stock market a lot of people think it’s very choppy and volatile at times,” he said. “The accommodation is not the same. You can earn income from it and it is easy to give a loan. It tends to increase in value over time. Returns are good, and they are not correlated to stocks. It’s a tangible asset that you can understand, and all we’ve done is make it easy for investors to invest in this asset class.

See also: New Jetty Rent product lets tenants choose when to pay

So easy, in fact, that investors have little to do except make sure they have the money to invest in the first place. Roofstock solves homeowners’ biggest headaches by taking care of property management. Beasley said the company took the time to monitor different property managers in each of the markets it operated in, so it only worked with those it considered to be the best. And he is now able to offer his own property management service in the form of Great Jones, which he acquired in August.

“Now we can say, Here are the prices and here is the service,” Beasley said. “Then we can say, ‘Here are two or three more choices, so you can decide. We like to offer the choice to get people to come to the market, and they tend to like it too. “

There are additional benefits. Through its property managers, Roofstock collects rent on behalf of landlords and offers asset management functionality through its Stessa app.

“Stessa’s asset management software that shows your profit and loss and all of your historical financial data – all of your loan information and property documents,” Beasley said.

Read also: Commercial real estate company JLL invests in rental market with Roofstock deal

With Stessa, Roofstock can monitor the performance of its investors and make offers and suggestions on areas for improvement. So, for example, if a customer pays 5% interest on their mortgage and Roofstock finds a better deal, they can notify that user and help them refinance at 4% instead. He can also appeal property taxes when he determines there is a chance he will be successful.

“These are relevant offers that we believe will help you better manage your investment,” said Beasley. “We add approximately $ 1 billion per month in assets using this software, and it’s free to use. “

Roofstock is very unlikely to be successful if it did not also offer benefits to sellers. In turn, people are selling their homes – especially rental units that may already be occupied – more profitably.

As Beasley explained, Roofstock offers a value proposition as it charges a sales commission of 3% of the transaction amount. This compares well to hiring a broker, who typically charges a 5% or 6% commission. Plus, with Roofstock there is also no need to leave the house first, as it would be when selling through traditional channels.

See also: Buyers and sellers are putting up a welcome mat for unplanned real estate closings

Roofstock serves a niche market, with the average user of its platform owning 1.7 homes, according to its own data. Beasley said about 80% of rental housing in the United States is owned by people who own two or fewer properties. Of course, this means that most homeowners are just ordinary people looking for an investment opportunity, so there is a significant potential market for the types of tools that Roofstock offers to simplify the way people manage these investments.

“These are mostly people living in more expensive places who are looking for a home elsewhere in the country, and they are buying their first investment properties through us,” said Beasley. “And they can do it visibly.”

Although he did most of the work for these owners, Roofstock still found a few ways to generate income. Not only does it take discounts on both sides of the transaction, both sellers and buyers, but it also takes a portion of the property management fees it charges. Finally, it operates a differentiated iBuying model, buying homes currently occupied by tenants and selling them to other future owners.

“We are offering this as a service, and we will usually buy it at a small discount and bring it back to our market,” Beasley explained. “So if you’re in a rush and don’t have time to go through the entire marketing process, we can get you all the cash quickly. “

Roofstock is well positioned to be a Rental Home Buyer, Beasley said, because he has knowledge of the market and knows when a home is likely to be traded. It also offers the benefit of getting paid while sitting on the property and waiting to sell it.

Read also: Homebuying Platform rolls out welcome mat for investors

“We’ll usually keep them for a few months, they’ll enjoy, and then we’ll sell them back, so it’s a win-win for everyone,” Beasley noted.

Looking to the future, however, Roofstock’s secret weapon may well be the massive database it has assembled of America’s housing stock. Beasley revealed how the company mapped all of the 90 million homes in the United States. Known as the “portfolio optimizer,” this database contains information about every house in the country.

“We know which ones are rentals, what the neighborhoods look like, how they’re all trending and what’s available for sale,” Beasley said. “So we can go down to any city or neighborhood and say which ones are rental units. And if it’s not rental housing today, we can tell you which ones are good candidates to become rental housing in the future, if there is a demand for it.

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NEW PYMNTS DATA: TODAY’S SELF-SERVICE PURCHASE JOURNEY – SEPTEMBER 2021

On: Eighty percent of consumers want to use non-traditional payment options like self-service, but only 35 percent were able to use them for their most recent purchases. Today’s Self-Service Shopping Journey, a PYMNTS and Toshiba Collaboration, analyzes more than 2,500 responses to find out how merchants can address availability and perception issues to meet demand for self-service kiosks.

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