Roofstock

[Rob Willhite]

Anyone have any experience with Roofstock.com? General thoughts?

[David Pizzi]

Here's my two larger pennies on Roofstock and the broader prop tech industry...

1) Prop techs are very new to the marketplace and are gaining significant steam based on high property valuations across the country in solid  and not so solid markets. These sites tell you what you want to hear. They're not lying about anything per se, but they rarely discuss the past performance of most markets in a downturn. They also tend to dig more into the positive return on analysis of properties. but less on the more nuanced details such as how far the value of the overall market has come from its inherit/median value based on incomes, job growth, internal vs external population growth and diversity of employment industries.

2) Every investor should know that we've never seen this much cash sloshing around the marketplace (paired with debt) as we do today. When everyone and their grandma are investor experts from an armchair in Brooklyn, that worries me. Most investors never step foot in Memphis. Oklahoma City, Indy or Chattanooga. They just read the data put in front of them and pull the trigger based on near past and pro forma numbers. Tier 2 and 3 markets are about the pockets and neighborhoods, not the city as a whole sometimes. When you buy Indy, which area are you buying? That can significantly make that advertised 12% gross return become a 4% return or lower.

Throwing in one more Abe Lincoln coin here...if you're an investor, visit the market you're investing in, create one on one relationships with your service partners on the ground, start you're own RSS feed on all things on the city from jobs, crime and fiscal health of the city and state (reason I stay faaaaaar away from Chicago and Illinois). A fancy online dashboard may seem like it's all good in the neighborhood, but when things go south, you're the one left holding the bag. Not the turnkey operator, not the prop tech that went belly up because their VC money dried up and were leveraged to the tilt and not the Roofstocks of the world that just presented you with opportunities.

To be clear, this is not a knock on Roofstock, but how the prop tech industry as a whole may be helping to inflate values in areas that really shouldnt see the values they're seeing incrementally rise. This will become an issue at some point, but who knows when it actually will negatively hit the market. Just make sure you know who's writing the story.