How do YOU analyze a Roofstock property purchase

Question

My wife and I have been scanning Roofstock in search of our first rental property purchase. We've read ( LOTS ), listened to countless podcasts and after a year of research and saving we're now in a place where we have the 20% downpayment and can invest in our first rental property.

Roofstock really appeals to us as first timers as it seems to remove a lot of the hurdles that typically face out of state investors ( we live in Silicon Valley and cannot afford a California rental property ). I'd love to get people's advice on their thought process when analyzing a Roofstock property. I would say that we're pretty risk averse given this is our first purchase, because of this we're not looking at "warzones" in the hope of avoiding tenant issues. We're not looking for this property to be something we retire to either, rather one that cash flows "something" and builds "some" appreciation as it goes.

I'd love to use the following Roofstock listing as an example and hear what more experienced investors would think about when analyzing it. It has a lot of the things I "think" I'm looking for, but I'm very certain I'm missing things. Or, maybe by some miracle I'm on the right track? :)

https://www.roofstock.com/investment-property-details/texas/5585-scenic-dr-beaumont-77713/1717037

Many thanks in advance for any responses, again I'm not coming at this from a "I'm going to buy this and want someone else to tell me it's good/bad", I'm more interested in what people's thought process is when assessing Roofstock properties, and it will be super helpful for me to be able to tie that to a specific example.

-Tim

Michael P. · Answer

What is fun about roof stock is that you can throw out lowball offers all day long.  So just as a very general example if your target is a 1% rule property throw out a high volume of lowball offers to get 1.5% until eventually someone will bite.

Chad McLeod · Answer

I made a purchase through Roofstock a couple months ago.  I would disagree with the others who say it's the same as searching Zillow, Redfin, etc., because each property has a dedicated agent to answer questions, walk you through the process, etc.  Some, but not all of the properties have already had an inspection done.  So if you are satisfied with it you don't have to pay for an inspection.  The one I purchased already had one done but I paid for my own anyway, just to be safe.

I agree about the neighborhood ratings sometimes being off, so definitely research those.  The house I bought had a recent 3-year lease signed so I didn't have to find tenants and had money coming in right away.  The rents were in line with the market rate and the price was very fair (actually appraised for $7K over sales price).

All in all, the Roofstock employees were fine.  The biggest issue is the referrals they give.  Since they've been in business for a while the PMs, insurance agents, etc., that they refer are now overwhelmed with new Roofstock business.  The PM they referred to me told me they went from 350 to 700 units in the last 2 years.  So I would highly recommend thoroughly vetting the referrals or just finding your own.  If you go with their recommendation just know communication may be pretty bad.

All in all it was fine.  It's a little easier than doing it yourself because they do some of the leg work for you, but they are growing absurdly fast and I think they might be a victim of their own success at this point.

Any questions just holler.

Taylor L. · Answer

You still need to do all of your own due diligence. Make sure the rents, taxes, etc they're stating are accurate to the market. Check out the building, or hire someone to inspect it for you. Evaluate the local market, which is best done by going there yourself.

I haven't invested with Roofstock, but I do actively & passively invest via syndication. For the syndications I passively invest in, I'm always careful to double check and verify the numbers stated by the sponsor. There's too much of an incentive to fudge the numbers, and I stand to lose too much by not verifying! Trust but verify.

There are many other turnkey companies, you may want to look at their properties as well so you can get a broader feel for what's out there.

Maureen McCann · Answer

Hi @Tim B., I wanted to back up what @Taylor L. and @Marco Santarelli said. Roofstock uses the phrase turnkey, but there is a difference between turnkey and full-service turnkey. Seeing that this will be your first rental property and you are looking at investing OOS, researching full-service turnkey companies will be your best bet. If you have a specific market you are looking to invest in, the BP community could give you some great full-service turnkey company options.

Best wishes!!

James Wise · Answer

You need to analyze a Roofstock property purchase same way you would any other property purchase. Roofstock is nothing more than an online marketplace such as Zillow, Loopnet or the MLS.

Brandon Temples · Answer

@Tim B.

I haven’t invested with them, but I can certainly tell you that their neighborhood rating is skewed pretty hard. I used to love in some of the areas that they have 3 stars in, and the the areas have far higher crime than they would have you think. Specifically Lehigh Acres, Fl and north Jacksonville, Fl.  It’s anecdotal, but I would definitely find my own basis for assessing a neighborhood.

Marco Santarelli · Answer

Hi @Tim B. — Welcome to BiggerPockets.

Taylor makes a good point in that there are several other turnkey companies you should consider looking at to compare. I wouldn’t say Roofstock offers a “full service“ turnkey solution, and if you’re a relatively new investor that would be an important consideration.

Also keep in mind there are two categories of passive rental properties. Most of the inventory there is not turnkey by our definition if that’s what you’re specifically looking for.

Continued success!

Tom Ott · Answer

Well, I believe Roofstock is just like an Amazon for RE properties. I think it is just a marketplace. Just do your normal proformas and run your regular numbers you do for any other property. They aren't any different because they do not do it in-house nor do they do Turnkeys.

AJ Singh · Answer

@Tim B.

Look into central california rentals as well before jumping out of state.

Unless you want to scale to five or ten units OOS within two to three years, you will not be making much money. Do your own due diligence by flying to the cash flow market and taking a tour of neighborhoods before placing any rental under contract

There are lot of reputable turnkey providers and marketing companies on BP . keep reading and updating yourself.

Tim B. · Answer

All super helpful advice, THANK YOU. Adding turnkey provider research back into my to-do list.

How do YOU analyze a Roofstock property purchase

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