Roofstock Deal - Beginner Analysis (Requesting for Help/Advice)

Real Estate Deal Analysis & Advice
4yFollow

Roofstock Deal - Beginner Analysis (Requesting for Help/Advice)

Eddie L.
NY · Member since 2021 · 143 posts · 45 votes

Some Background

I'm a complete newbie living in New York. I never invested in real estate before but am definitely interested. Unfortunately my W-2 job really doesn't give me time to attempt more time intensive strategies like BRRRR or Fix & Flip and I don't have any connections who are interested in doing so. I have a primary residence and was sadly not via house hacking. This was before I learned about all the benefits of real estate. I'm considering a turnkey property with property management as my first real estate investment. Pay a premium sure but at least get some real exposure to real estate and it's a start, right?

Questions
I found this deal on roofstock. Have a lot of questions not really specific to this property but in general using this one as an example.

https://www.roofstock.com/inve...

1. As any real estate property, I think I should do the due diligence of actually driving over there and seeing the neighborhood. When surveying the neighborhood, what would you typically look for? Crime, restaurants, shopping, business districts, etc.?

2. When observing the property from the outside and its surroundings, how would you evaluate it as a beginner with no construction or real estate experience? Like how can I judge if the roof looks good or anything else that may come at a hefty price to maintain or fix in the short term?

3. In terms of deal analysis i.e. the numbers, based on all of roofstock's assumptions with a 20% down this seems like a great deal. How do you typically analyze the numbers here? It's positive cashflow ~$300/month even with 20% down so I think that's a good start. How do you confirm each of the assumptions made by roofstock? 

     1. 3% Annual Rent Growth - Is there a way to verify this? Ask for the ledger and see if the tenants were actually paying rent with a 3% increase in recent years?

     2. 5% Vacancy Factor - There's no way to confirm this right? Besides... maybe asking if others here happen to invest in the same area and see how their vacancies are like?     

    3. Property Tax - Based on public records, the property tax is current assessed at a tax value of $121,800. Does that mean that if I pay the asking price of $175,000 then that becomes the new tax value and the property tax will be higher?

  4. Property Management - This is just based on agreement with property management company hired for the property. Is there like a yelp kind of review website for property management companies to compare them?

5. Repairs, Maintenance, and Capex - I feel like this is probably the hardest to analyze? How do you have a good estimate for how much you expect to pay or set aside for these?

0Reply
17 views

Most Popular Reply

Account Closed
Specialist · Member since 2021 · 37 posts · 211 votes
4y

@Eddie L. - sounds like a sound plan Eddie!  That is our philosophy here as well and we kind of give that away in the name of our company RENT to Retirement - focusing on positive cash flowing properties to generate passive income.  The appreciation is great - but also as you mentioned - not as predictable as you are subject to market conditions.  By having positive cash flowing investments you can begin to replace your active income, as well as take advantage of appreciation over time to leverage that equity to acquire more properties - and you can take advantage of all of this while using the bank's money to secure assets!  Feel free to reach out with any questions Eddie!  

9Reply
See this reply in the discussion

14 Replies

Jump to latestLatest
  • Jason G.Pro Member
    Rental Property Investor · Long Island, NY · Member since 2015 · 434 posts · 495 votes
    4y

    @eddie li 

    1. As any real estate property, I think I should do the due diligence of actually driving over there and seeing the neighborhood. When surveying the neighborhood, what would you typically look for? Crime, restaurants, shopping, business districts, etc.?

    I purchases 6 oos properties and have never seen any of them in person. Doesn't mean you can't or shouldn't, but it isnt a requirement.  You have websites that show crime information for specific areas, search news sites for articles on that town, look at forums for that area, search bigger pockets, do Google map walk through, etc.  

    2. When observing the property from the outside and its surroundings, how would you evaluate it as a beginner with no construction or real estate experience? Like how can I judge if the roof looks good or anything else that may come at a hefty price to maintain or fix in the short term?

    Since you are using Roofstock this is what inspections are for.  If you ultimately connect with an experienced agent that works with investors they could help you evaluate properties before putting an offer in.

    3. In terms of deal analysis i.e. the numbers, based on all of roofstock's assumptions with a 20% down this seems like a great deal. How do you typically analyze the numbers here? It's positive cashflow ~$300/month even with 20% down so I think that's a good start. How do you confirm each of the assumptions made by roofstock?

    Look at what properties in the area are being rented for and what the current listing amounts are for, check the current taxes.  Their insurance and mortgage interest rate may or may not be accurate depending on who you use and your own financial situation. 

    1. 3% Annual Rent Growth - Is there a way to verify this? Ask for the ledger and see if the tenants were actually paying rent with a 3% increase in recent years?

    Aside from that search bigger pockets see what investors are saying about the area.   You can also see posted rents on sites like zillion for a property and see how those listing changed over time.

    2. 5% Vacancy Factor - There's no way to confirm this right? Besides... maybe asking if others here happen to invest in the same area and see how their vacancies are like?  

    I believe the average is 7% but it can be location specific.  

    3. Property Tax - Based on public records, the property tax is current assessed at a tax value of $121,800. Does that mean that if I pay the asking price of $175,000 then that becomes the new tax value and the property tax will be higher?

    I dont know how NJ adjusts their taxes for new purchases. 

    4. Property Management - This is just based on agreement with property management company hired for the property. Is there like a yelp kind of review website for property management companies to compare them?

    Yes. Search yelp, bbb, Google reviews, Glassdoor, bigger pockets, etc. You will see reviews from tenants and landlords.  Not all PMs have a lot of reviews.  But I mostly focus on landlord reviews.

    5. Repairs, Maintenance, and Capex - I feel like this is probably the hardest to analyze? How do you have a good estimate for how much you expect to pay or set aside for these?

    There are average %s you can set aside each month and different items have different average life expectancies.  You will have years where there is only minor work done and others that just sucks.  I had 3 hvacs replaced this year plus I had to redo a driveway and have a septic tank pumped.  I spent a lot of money but that is why we put the money aside for when things do happen.

    6. I'm sure this can vary company by company, but do property management companies typically manage the day to day repairs and maintenance as well? Just confused why roofstock show a separate expense for property management fee and repairs and maintenance. If not, how do you go about finding good local handymen in an out of state market?

    Most PMs handle collecting rent, evictions, advertising and placing tenants and maintenance and repairs.  While they handle the maintenance and repairs you still pay for them. They will get estimates from vendors and coordinate with them for the work but you pay them for the work not the PM.  

    1Reply
  • Eddie L.
    OP
    NY · Member since 2021 · 143 posts · 45 votes
    4y

    @Jason G.

    Jason thanks so much for the info. Investing that far out of state is so scary. Like the ones I looked are within 3 hour driving range. I'm sure there's much better opportunities further out but not sure how to build the confidence to invest somewhere without ever seeing in person. Since you have OOS properties that you've never seen in person, I assume they're fully managed by your PM? In terms of repairs & maintenance, do you typically work with the PM in finding vendors or do you just see the vendors proposed by the PM and do a little due diligence online to see which one seems most appropriate? Just wondering how hands off as an investor you are when investing OOS.

    0Reply
  • Jason G.Pro Member
    Rental Property Investor · Long Island, NY · Member since 2015 · 434 posts · 495 votes
    4y
    Originally posted by @Eddie L.:

    @Jason G.

    Jason thanks so much for the info. Investing that far out of state is so scary. Like the ones I looked are within 3 hour driving range. I'm sure there's much better opportunities further out but not sure how to build the confidence to invest somewhere without ever seeing in person. Since you have OOS properties that you've never seen in person, I assume they're fully managed by your PM? In terms of repairs & maintenance, do you typically work with the PM in finding vendors or do you just see the vendors proposed by the PM and do a little due diligence online to see which one seems most appropriate? Just wondering how hands off as an investor you are when investing OOS.

    They are fully managed by property management companies.  They have relationships with different vendors and get me estimates.  Sometimes I ask for multiple estimates if it is a larger project or if I think the first one seems high and I approve the scope of work and they send before and after photos of the work completed.  With my first property I was very stressed out, but I just pushed forward past that discomfort and now four years later and six properties, I'm pretty comfortable with it.  

    0Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    4y

    @Eddie L. there are tons of threads on Roofstock on BP - find some and read them.

    You have a primary residence - so what?  Can you move into a house hack and rent out your primary?  If you have 20% down for a turnkey, you must have some cash.

    I can't see the link, post the specific expenses if you want more detailed analysis.

    0Reply
  • Eddie L.
    OP
    NY · Member since 2021 · 143 posts · 45 votes
    4y

    @Nicholas L. 

    1. Primary residence is a coop that does not allow subletting.

    2. 

    https://www.roofstock.com/inve...
    616 Wilbur Ave # 1
    Hammonton, NJ 08037

    Duplex

    2 bd, 2 ba | 1,108 sqft | Built in 1900

    Owner is responsible for

    Refrigerator, Stove

    Tenant is responsible for

    Electric, Garbage, Gas, Landscaping, Water

    INCOME

    Rent

    $1,725

    Vacancy Factor

    - $86

    Expected Rent

    $1,639

    EXPENSES

    Property Taxes

    - $292

    Property Management

    - $131

    Leasing Fees

    - $41

    HOA Fees

    - $0

    Insurance

    - $73

    Repairs & Maint. (Reserve)

    - $76

    Operating Expenses

    - $613

    Net Operating Income

    $1,026

    Capital Expenditures (Reserve)

    - $66

    Total Unlevered Cash Flow

    $961

    Mortgage

    - $668

    Total Net Cash Flow

    $292

    0Reply
  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    4y

    Reach out if you want my excel/google sheet.

    0Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    4y

    @Eddie L.

    Your first deal will take the most time and due diligence. You will likely spend less time analyzing deals going forward.

    I don't know how much time you are putting into your W-2 job, but if you are putting in that many hours that you don't have the time to take care of your own financial freedom, you may be with the wrong employer or wrong industry.

    With that said, you may want to consider these options if you truly don't have the time

    1) Work with a vetted syndicator
    2) Pick a market and work with a turnkey provider
    3) Buy a house that is in turn-key condition and have a property management company manage the property.

    Best of luck!

    [email protected]917-280-8544
    Basit Siddiqi CPA4.979 Reviews
    View Page
    0Reply
  • Eddie L.
    OP
    NY · Member since 2021 · 143 posts · 45 votes
    4y

    @Basit Siddiqi

    1. Should I try to look for syndication as a newbie? This means to search for partners and team up on a deal right?

    2. Pick a market and work with a turnkey provider. I think the key here is choice of market. Would you have any advice on how to choose a market or how to do the research? I imagine going through sites like city data (although data here seems two years old) that has extensive data that goes through age, employment/unemployment, crime rate, etc. As for the turnkey provider, would you reach out to local turnkey provider or larger ones like REINation or RenttoRetirement? Heard some concerning stories about turnkey providers providing very poor properties that are just "lipstick on a pig?"

    3. This is researching for a market, then analyze turnkey property deals available on like zillow, redfin, realtor, etc. and just purchase like any normal home purchase and afterwards hire a property manager to advertise, screen, then manage the property going forward?

    0Reply
  • Account Closed
    Specialist · Member since 2021 · 37 posts · 211 votes
    4y

    @Eddie L. - welcome to the exciting world of real estate investing! It's easy to get overwhelmed with all of the different ideas and concepts out there, part of this will be figuring out what is right for you! As others have mentioned - there are so many ways to get started from house hacking, to the BRRR method, syndications, turnkey, etc. A lot of this is going to be what fits best for you - your comfort level and your experience level. You have a GREAT resource here in Bigger Pockets - lots of great advice, great investors, and a whole lot of information - just don't get paralysis analysis (we have all been there for sure). Also when evaluating markets and running numbers a lot of that will be dependant on several different factors - what market are you operating in? What is your overall goal - are you focusing more on higher appreciating markets, or is your goal cash flow? Starting with the end in mind is always a great way to start analyzing properties and portfolios to determine the steps to get there. As far as turnkey companies - we have a bunch of posts related to our company and I wanted to share those with you to aid you in your research as well:


    https://www.biggerpockets.com/users/ericw536/references

    https://www.biggerpockets.com/forums/92/topics/518583-feedback-on-renttoretirement-and-zach-lemaster

    https://www.biggerpockets.com/forums/92/topics/765347-rent-to-retirement-review

    https://www.biggerpockets.com/forums/850/topics/895660-my-first-investment-property-an-out-of-state-deal

    https://www.biggerpockets.com/forums/92/topics/893621-rent-to-retirement-review?highlight_post=5222888&page=1#p5222888

    https://www.biggerpockets.com/forums/311/topics/915728-experience-with-rent-to-retirement-turnkey?page=1#p5345200

    https://www.biggerpockets.com/forums/92/topics/808479-rent-to-retirement-experiences


    https://www.biggerpockets.com/forums/12/topics/533693-anyone-worked-with-renttoretirement-turnkey

    https://www.biggerpockets.com/forums/92/topics/581730-rent-to-retirement-zach

    https://www.biggerpockets.com/forums/48/topics/874096-reviews-on-r2r-and-nch?page=1&utm_source=Iterable&utm_medium=email&utm_campaign=Transactional:%20topic_notification&utm_content=Transactional#p5123754

    https://www.biggerpockets.com/forums/311/topics/883772-turnkey-investing-renttoretirement-feedback-reviews?highlight_post=5171720&page=1#p5171720


    https://www.biggerpockets.com/users/ZacharyCole/references

    If you have any other questions let me know!

    8Reply
  • Eddie L.
    OP
    NY · Member since 2021 · 143 posts · 45 votes
    4y

    @Eric Winkler

    Thanks for all the information. It is definitely overwhelming for a beginner and more so for one that has no real estate experience (not counting the primary residence purchase where we purchased on the basis of comfort and affordability rather than any consideration or analysis of appreciation). Yea I've browsed through a lot of posts on everyone's experience with different platforms such as REINation, RenttoRetirement, Roofstock, etc. They're helpful in the sense of providing an overview of their experience in detail. I guess I just need to figure out market and how to realistically evaluate a deal. I live in New York. Goal is to work towards financial freedom one day by taking the first step into real estate and hopefully slowly ease into full time real estate one day. I was thinking to focus on cash flow over appreciation because I think that's easier to analyze/predict than appreciation?

    1Reply
  • Account Closed
    Specialist · Member since 2021 · 37 posts · 211 votes
    4y

    @Eddie L. - sounds like a sound plan Eddie!  That is our philosophy here as well and we kind of give that away in the name of our company RENT to Retirement - focusing on positive cash flowing properties to generate passive income.  The appreciation is great - but also as you mentioned - not as predictable as you are subject to market conditions.  By having positive cash flowing investments you can begin to replace your active income, as well as take advantage of appreciation over time to leverage that equity to acquire more properties - and you can take advantage of all of this while using the bank's money to secure assets!  Feel free to reach out with any questions Eddie!  

    9Reply
  • Eddie L.
    OP
    NY · Member since 2021 · 143 posts · 45 votes
    4y

    @Account Closed - Hey Eric, I was able to set up an initial call through RenttoRetirement's website. Will be talking to Adam in a few days. Any advice on prep work? Was planning to lay out how my current assets are spread out (not much) and see what options are available. In the meantime, I'm also reviewing the website's inventory.

    0Reply
  • Account Closed
    Specialist · Member since 2021 · 37 posts · 211 votes
    4y

    @Eddie L. - Hey Eddie!  Sounds great!  Adam is a wealth of knowledge - he is an investor himself as well as working with investors for quite a while now!  As far as prep work goes, it's great that you are looking at the inventory so you have an idea of what is out there.  I like to tell folks to have some type of goal in mind - in other words - what is it you are looking to achieve through investing - of course the cash flow and appreciation - but quantify that a bit - is this to replace your active income, is this to diversify your portfolio, to hedge against inflation, etc - by having a specific focus it makes it a bit easier to figure out which direction to go, what types of investments to point out to you and get you closer to what it is you are trying to achieve.  Of course, if you are just looking to jump in and get started while getting education along the way - that in itself is a great goal as well!  Also take a look at the markets on the website so you have an idea of what they are as well as why we invest in these areas!  We look forward to speaking with you soon!

    5Reply
  • Julie D.
    New to Real Estate · Westminster, CO · Member since 2022 · 6 posts · 0 votes
    4y

    Hi Eddie!

    I'm really new to real estate investment and I am also looking at some properties on Roofstock. Have you bought the property? If so, could you share the process? Is the property rented or still vacant? Do you get the cash flow you expected? Any issues during the buying process?

    I know it's only been 3 months but I'd be interested in reading about your experience with Roofstock if the deal actually happened. Thank you

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free