Roofstock Case Study

[Jason G.]

My girlfriend and I have been saving money for a down payment on our first rental property and had initially been looking at single family properties and multifamily properties in upstate New York. In May 2017 I came across Roofstock and that shifted our discussion to the idea of purchasing an out of state single family property. I haven't seen anyone write a really thorough review of their experience using Roofstock, so I decided to document the journey. I know a lot of people are scared to pull the trigger, especially when they really have no idea what to expect, and just hearing people casually say they either had a great experience or terrible experience really doesn't help much in giving others an understanding of what the experience will be like. I decided to organize the post in date order based upon steps we took and all the interactions we had with Roofstock and their partners that they connected us with, which include Tru Mortgage, Real Protect Insurance, Excalibur Homes, and Mortgage Connect. I found the entire process a good learning experience and I hope others find the same by reading through the post.

May 26, 2017 (Friday)

We applied for a mortgage through Tru Mortgage, a partner of Roofstock through their company in anticipation of purchasing a single family property at $150,000 or less in Atlanta Georgia. We chose the Atlanta area due to their low purchase costs.

June 8, 2017 (Thursday)

We were approved by Tru Mortgage and made an offer on a property in Lithonia, Georgia. The property is a 3 bedroom, 2.5 bath, 1,616 sq ft home built in 1975 on a 17,424 sq ft lot. Roofstock rates the neighborhood as a 3/5, the elementary school a 2/10, the middle school a 5/10, and the high school a 3/10. A tenant is already in the property leased through April 2019 and pays $893 a month. As part of the property inspection report the report indicated that the following capital expenditures would be required:

1. Scrape and paint wood siding - estimated cost $1,650 @ turn.

2. Repair driveway and walkway cracks - estimated cost $2,460 @ 1+ years.

3. Fill holes in yard to remove trip hazards - $90.00 @ turn.

Roofstock requires a credit card at this point and the seller has two days to accept, counter offer, or reject the offer or the offer will expire.

Property Photos

June 9, 2017 (Friday)

The seller submitted a counter offer and we then responded with a second offer which was accepted at $81,000.00 My credit card was then charged a "Marketplace Fee" of $405.00. The Marketplace Fee is .5% of the purchase price. I am also given access to a "Property Closing Timeline" feature on the site for the chosen property. There are twelve steps with an estimated closing date of July 18, 2017. These are the twelve steps:

01. Purchase and Sales Agreement

02. Earnest Money Deposit

03. Financing

04. Insurance

05. Documents and Financing

06. Appraisal Fee for Property

07. Final Insurance Quote and Terms

08. Loan Terms for Financing

09. Property Management

10. Property Management Agreement

11. Closing Documents

12. Final Disbursal of Funds

We were contacted by Marissa at Roofstock via e-mail and was told by Marissa that she would be our point of contact moving forward and requested that I call her to discuss certain details on the phone. I was told I would be sent a Purchase and Sale Agreement (PSA) that will need to be executed via Docusign and asked me who will be on the title, our mailing address, and information for our loan officer. She also stated she would be sending me a home insurance quote in the next few days and would like to know which property management company we would like to use. I told her we would like to go with Excalibur Homes, which was listed as an option on Roofstock. She said the PSA would be sent to us within twenty-four hours. I asked her if it would be sent on Monday since the next day was a Saturday and she said it would be sent on Saturday.

According to Roofstock, "A PSA will be delivered electronically promptly following payment of the Marketplace Fee and must be executed by Buyer within 24 hours of receipt."

June 12, 2017 (Monday)

I asked Marissa if everything was still on track because we had not received the PSA. She stated the seller signed it that morning and it would be sent over later in the day. We received the PSA and executed it through Docusign, but had a question related to part of the agreement which stated that we had an obligation under the DeKalb County Plumbing Ordinance. It stated that we "shall be obligated as a condition of applying for water service from DeKalb County to attach to the application a certificate of compliance signed by a home inspector, Department of Watershed Management inspector or licensed plumber certifying that all plumbing fixtures on the Property are water conserving plumbing fixtures." We wanted to know how we would go about having this completed.

June 13, 2017 (Tuesday)

We executed the Purchase and Sale Agreement. Roofstock verified that financing was selected through Tru Mortgage.

Marissa responded to my question about the plumbing ordinance telling me that as per the lease all utilities should be in the tenant's name and will be checking with the current property manager that it is in fact in the tenant's name and will continue to be in it when the property is sold. However, this did not answer my question because the ordinance appears clear that I need a certificate of compliance. I asked her if she knew if we still needed that certificate if this tenant leaves and is replaced by a new one. Marissa then contacted the DeKalb County Watershed Department who confirmed to her that nothing needed to change if the utilities were in the tenant's name, but that if the tenant left and a new tenant opened an account then the certificate of compliance would be required. They recommended that once I close on the property to have an account opened with the water/sewer service and keep it inactive. She also stated that she would be checking with their inspection company that conducted the inspection if they will be able to complete the certificate of compliance.

I received a separate e-mail from an Alexis at Roofstock who provided wiring instructions for the $1,500 Earnest Money Deposit. I then went to the bank and initiated the wire transfer, which cost $25.00 in addition to the $1,500 sent.

June 15, 2017 (Thursday)

Roofstock confirmed that the Earnest Money Deposit of $1,500.00 was wired to the Title Insurance Company.

Real Protect gave us a quote for insurance. What I found interesting was that in Roofstock's document/diligence vault they had a quote from a different carrier with a lower premium. Their application attached that we were required to fill out contained a lot of questions that are geared towards those with extensive real estate portfolios or who intend to flip houses. I was told that Marissa would be able to help us through those items of the application that we may not know the answers to regarding the actual property. I asked Marissa if we would be receiving quotes from any other insurance carriers and was told that we wouldn't, that this carrier was the only one and that it was a sister company to the one that provided the quote found in the document vault on their site. She also updated us that she was still waiting for a response from the inspection company on the certificate of compliance.

I filled out the application but we did not execute it. I asked Marissa to review and add in any property information we couldn't answer and asked her to send it back to me with any changes she made to it so we can then execute it and send it back to her.

Tru Mortgage sent instructions on completing the required documents to finalize the loan application which we filled out and sent back through their website.

June 16, 2017 (Friday)

We received a response from Tru Mortgage that they received the executed loan documents and that we will be receiving the instructions on how to pay the appraisal fee. Shortly thereafter we received those instructions and paid the fee of $695. We were told we would receive an update once the appraisal was scheduled.

Marissa e-mailed us a completed insurance application. We told her the Tru Mortgage documents were executed and the appraisal fee was paid and we would be sending her back the executed insurance application later in the day. We also asked for an update on the certificate of compliance for the water company. She told us that she followed up with the inspector and is waiting for a response. We sent her the completed insurance application and asked her what the next steps will be as we move towards closing.

An introduction e-mail was sent from Marissa to Excalibur Homes, the management company we chose to manage the property.

June 17, 2017 (Saturday)

Tru Mortgage informed us that our loan has been sent for processing.

June 19, 2017 (Monday)

Excalibur Homes followed up with us and we requested the management agreement for review. After reviewing the document and asking some questions about the fees we completed the agreement and e-mailed it back to them. The management fee is 6%.

Marissa informed us that the appraisal for the property has been scheduled for Thursday, June 22nd. She confirmed that she sent the completed insurance application to the insurance carrier and followed up again with the inspector for the certificate of compliance for the water company.

June 20, 2017 (Tuesday)

Marissa informed me that their inspector could not issue the certificate of compliance.

I was confused because one of Roofstock's guarantees is that they complete "[a] property inspection conducted by an experienced national inspection firm" and provide "[a]n estimate of the cost of major repairs." The entire point of the Roofstock certification process, as per Roofstock, states that "[t]he Roofstock Property Certification allows prospective buyers to see the diligence on each property from home, office or while on the road without the need to enter each home." This is especially important since as part of the buying process we waive the inspection contingency. According to Roofstock's site: "Waived Inspection Contingency: Since diligence information is provided prior to investment, there is no need for a traditional Inspection period or contingency. Investors should carefully review all of the materials in the Diligence Vault before investing." So the fact that the inspection company failed to either issue a certificate of compliance or indicate costs related to complying with the ordinance in order to obtain the certificate of compliance, puts into question, at least in my mind, the entire idea of relying on Roofstock's inspection process, to begin with.

I asked her to follow-up with the seller to see if they ever had one performed. She also explained that a company called Mortgage Connect will contact us to schedule a mobile notary to meet with us to sign the required closing documents once we get closer to the closing date.

Tru Mortgage sent us a Loan Estimate to sign, which we did.

June 21, 2017 (Wednesday)

The Roofstock website gave a notification that the insurance application was approved.

Marissa informed me that she contacted the seller to find out if they ever obtained a certificate of compliance.

I asked Excalibur if they received our completed management agreement and if they would be able to facilitate having such an inspection done to obtain the certificate of compliance. They responded that they can manage the property once we own it, but do not handle inspections prior. They provided a list of several inspectors we could use prior to closing.

June 22, 2017 (Thursday)

Marissa heard back from the seller who had not in the past obtained a certificate of compliance.

I asked Excalibur if they would be able to set up the inspection for the certificate of compliance after we close on the property.

June 23, 2017 (Friday)

I received appraisal report. The property is appraised at $88,000. Of note was that the report indicated that "[s]everal outlets are not properly secured to wall and some outlets do not function properly. Electrician is recommended to diagnose and repair. Estimated cost to cure $500." It also noted that "[d]riveway area by garage has severe cracking from nearby tree root system. Estimated cost to cure $500 (this price estimate does not include tree removal)." The issues with the electrical outlets were not reflected in the Roofstock inspection report.

I e-mailed Marissa with a copy of the report expressing my concerns as the electrical issues were not reflected in the inspection report and their inspector already won't issue a certificate of compliance for DeKalb Water even though they inspected the plumbing and fixtures and now we have an appraisal report that conflicts with the inspection report on the electrical review.

Roofstock gave a notification that the property was approved by the lender.

Marissa responded thanking me for sending her a copy of the appraisal report and said she would like to have the inspection company review the report as the electrical issues may have occurred after the inspection on November 23, 2016. She also reached out to the current property manager to see if they can shed some light on the matter.

I responded to her explaining that we are out of state investors who are relying on Roofstock to facilitate the purchase of this property. That the certificate of compliance issue is already frustrating enough because we have no way of handling it on our own and it is something that should be addressed prior to closing. That we haven't heard back from the management company if that is even something they can handle for us after closing. In addition, if the plumbing fixtures are not up to code then we are looking at potentially hundreds of dollars in extra costs that weren't revealed in Roofstock's diligence vault. Now with this electrical issue, there can be potentially very large costs if there are issues with wiring in the house. I explained that we already have a down payment ready to go on a second investment property and were planning on making offers on properties through Roofstock after we closed on this one, but that we were already stressed over the certificate of compliance issue and now we are getting a little freaked out with the possible electrical issues on top of the possible plumbing ones and I'm not sure how confident we can be in relying on Roofstock.

Moments after sending the above e-mail Marissa e-mailed the management company asking them to respond to my inquiry on whether they could handle the certificate of compliance.

Aside from one of our early contacts, all my communication with Marissa has been through e-mail. She responded to the above e-mail by calling. With respect to the certificate of compliance, she assured me that the management company would handle that. I explained that (1) This should have been something adequately documented in the Roofstock diligence vault prior to any offers being made, whether the faucets, shower heads, and toilets were up to code due to the local statutes requiring the certificate of compliance. (2) Irrespective of that not being done, I need to know if the management company will actually handle it for us after the fact because I still had not heard back from them. Her response was that as per the lease the tenant was responsible for utilities and that it would have been the tenant's responsibility to have a plumber inspect the property, remedy any deficiencies, and obtain the certificate of compliance. This definitely is not the case and she is mistaken about the tenant's responsibilities in this situation. I explained to her that one of the exemptions to the statute is if the property was purchased through foreclosure, which is what the seller did, a certificate of compliance was not needed. It is clear they purchased it on foreclosure, renovated the property, and then rented it and are now flipping it to yours truly. Moving on from that I explained that now we are dealing with this potential electrical issue and if there are wiring issues that mean opening up walls and it would cost a significant amount of money to remedy. She told me that she is (1) Waiting to hear back from their inspector to certify they inspected all the outlets and they were functioning as of the date of the inspection, (2) Waiting to hear back from the current property manager on whether or not the tenant made any complaints about electrical issues, and (3) Waiting to hear back from the current property manager on if the seller or tenant would be responsible for any electrical issues. She indicated from there she may need to get her Director involved in order to have the inspector sent back to inspect the electrical situation.

I received a response from Excalibur and was told the inspection could be completed for $250.00. I replied to confirm that they would set it up with the vendor and the tenant following closing and asked how I would pay for it; if I pay the vendor directly or the management company takes it out of a maintenance fund they will set up that is funded through collected rents.

June 24, 2017 (Saturday)

Excalibur confirmed they would be able to proceed once closing is completed with obtaining the certificate of compliance and explained we would send them the money and they would pay the vendor.

June 26, 2017 (Monday)

Marissa informed me that they will be scheduling a second inspection so the inspector can review the electrical issues indicated in the appraisal. The inspector will also inspect the plumbing to see if it conforms with the DeKalb water regulation and if so issue a certificate of compliance. I asked her if she heard back from the seller or current property manager as to whether they had any additional information regarding the electrical situation. She said she was still awaiting a response.

Tru Mortgage sent a status update informing me that my loan has been conditionally approved by underwriting.

June 29, 2017 (Thursday)

I asked Marissa if she had any updates. I also asked if there were any additional steps to finalize the insurance as the Roofstock website indicates the insurance has not yet been finalized. She told me that she has confirmed that we are all set with the insurance and that the only item outstanding prior to closing will be the inspection. She also confirmed with me that I will be using Excalibur for property management. She told me she will let me know tomorrow if she has the second inspection date, otherwise, another Roofstock employee would keep me updated next week since Marissa will be out of the office.

July 5, 2017 (Wednesday)

I asked Alexis, who Marissa indicated would keep us updated this week while she was out, if there were any status updates with respect to the scheduling of the inspection. She responded that they were currently working with the property manager and tenant for this inspection and will provide me with the scheduling information once available.

July 10, 2017 (Monday)

I asked Marissa if the second inspection had been scheduled and also if the closing will be pushed back since it is next week and the inspection hasn't been completed yet.

Tru Mortgage contacted me for some additional information relating to personal assets, employment verification, and a weird issue on my primary home's insurance which listed two mortgages when there really was only one.

July 11, 2017 (Tuesday)

Marissa responded that she reached out to her inspector facilitator for an update and will let me know as soon as she hears back.

I sent Tru Mortgage additional documentation they needed and a corrected insurance dec page.

July 12, 2017 (Wednesday)

Tru Mortgage confirmed receipt of the updated information I sent them.

July 13, 2017 (Thursday)

I asked Marissa if we would have to push back the losing since it is supposed to be on July 19th and the second inspection hasn't been completed yet. She said they are working with the inspector and hope to have it completed this week, they are just pending approval from the tenant. Roofstock is hoping to have the inspection completed this week with the report sent to me before having to send out an amendment to extend the closing.

I received a notification from Tru Mortgage that my loan had been fully approved by their underwriting department and was sent a final loan estimate to execute, which I did. I also asked Tru Mortgage some questions about planning for the future. I wanted to know if they offered only four mortgages to an individual or up to the ten limit and I also wanted to know if I took a HELOC out on my primary residence if I could use that to pay the down payments on future properties mortgaged through them. They told me that they go up to ten mortgages and could use the HELOC, but that they factor in the HELCO payments in my debt to income ratios to make sure I still qualify for a mortgage.

Mortgage Connect contacted us on my marital status for preparing the deed.

July 14, 2017 (Friday)

I asked Marissa for another update on the second inspection. I was told that Roofstock was still pending confirmation from the tenant and that they would be working to have it completed this weekend, or if not over the weekend, then on Monday.

I was sent a property management agreement from Excalibur Homes. This confused me because (1) we already sent them a signed agreement back on June 19th, and (2) the address on this agreement was incorrect. I was told his assistant sent it by mistake, but that they will follow-up next week since we are expected to close then.

July 17, 2017 (Monday)

The inspection was performed and the certificate of compliance was issued. A review of the electrical system revealed "1. The outlet behind the tv is not functioning properly. 2. The dining room outlet is not functioning properly. 3. The gfci outlet in kitchen is installed on an angle. It's hard to plug in appliances. 4. The living room outlet next to dining room is loose in the wall. 5. The living room outlet next to the foyer is loose. 6 Upstairs outlet by window is loose. 7. The Master outlet next to hall door isn't functioning properly. The Master outlet by the window isn't functioning properly. 8. After testing a representative number of outlets in each room it is recommended to have ALL outlets replaced. Most outlets are functioning properly but if you put any side pressure on the outlets they lose connection. This could be a possible fire hazard." I was told that with respect to closing Mortgage Connect and Tru Mortgage would be working together on the closing papers and I would be forwarded the documents to review along with wiring instructions for the down payment and closing costs and that Mortgage Connect would be contacting me to schedule the mobile notary for us to execute the closing papers.

We received a closing estimate from Tru Mortgage and executed it.

July 18, 2017 (Tuesday)

I e-mailed Mortgage Connect and asked them how the closing will be scheduled. According to the PSA it should be occurring tomorrow. They said it would be going forward tomorrow as scheduled and wanted to know the location where we wanted the mobile notary to meet us and at what time. We gave them our home address and asked to do it at 5:30 p.m. The time was confirmed and then a short time later we were informed that the lender was not prepared to proceed tomorrow, but would be ready for the day after, July 20th and asked if we can do the same location and time. We agreed. We were told we would need to make copies of two forms of identification and that they would bring all the closing documents.

July 19, 2017 (Wednesday)

Marissa sent me a pre-closing check-in e-mail to see if we had any questions. I told her I was confused about when to wire the down payment/closing funds as we had not yet received the wiring instructions from Mortgage Connect. She told me that it should be sent shortly before or after the closing.

I asked Mortgage Connect for the final wiring instructions and amount, which they provided.

The mobile notary called to confirm the meeting for tomorrow. She told me that we would also need an attorney from Georgia on the phone as we were signing the documents and that Mortgage Connect would set that up.

July 20, 2017 (Thursday) [CLOSING DAY]

We went to our bank and wired the down payment and closing funds as instructed. Wiring cost us $25.00.

The mobile notary was thirty minutes late due to traffic. Many of the documents for some reason did not include my name, but only my girlfriend's, so we had to add my name. There was also an issue of requiring a witness for several documents, which was not something the mobile notary or I were informed about. We had to recruit our thankfully very friendly neighbor for that. We wrapped up the closing at around 7:30 p.m. and the mobile notary headed to UPS to overnight the documents.

June 21, 2017 (Thursday)

I told Marissa about the issues with the closing documents. I also asked her about what happens next, such as when we receive the lease agreement, copies of all the executed closing documents, the seller's keys, etc. She e-mailed us the lease agreement and said, "we await to hear from Mortgage Connect that they’ve received funds from you and seller and dispersed them to the appropriate parties (security deposit will be transferred directly to Excalibur). Once they inform us this is done, I’ll be sending you official congratulations on purchasing the property. At this time, we will also be alerting Excalibur that the property has fully closed and they are free to reach out to the tenant. Additionally, as soon as the county courthouse records your title deed, Mortgage Connect will be sending that directly over to you (in the meantime, you should be receiving a copy of the fully executed closing docs soon). As for keys, the seller is an institutional seller and does not keep keys to avoid any liability concerns. They only access the property with the permission of the tenant. If you would like a copy of keys, Excalibur should be able to request a copy from the tenant."

I informed Excalibur Homes that we closed on the property and that Roofstock was able to obtain the certificate of conformity prior to closing. They told me that they are still waiting to receive the deposit and lease documents from the closing attorney and Roofstock, but expect to receive everything by Monday and at that time I will be introduced to the person that will specifically be handling the property management of the property.

Tru Mortage sent me a notification that my loan has been funded.

Expected Monthly Cashflow

Gross Income: $893.00

Expenses

- Mortgage (Principal, Interest, Insurance, and Taxes): $540.30

- Management Fee (6%): $53.58

- Vacancies (5%): $44.65

- Repaires & Maintenance (5%): $44.65

- CapEX (8%): $71.44

Net Income: $138.38

Thoughts on Roofstock

Fees: I've had friends ask me how Roofstock makes their money since it seems like they are doing a lot of work on their end to facilitate the sale and purchase of the property. The buyer pays a .5% marketplace fee when their offer is accepted and the seller pays a 2.5% broker commission and a 2.5% all-in-seller fee. So on a $100,000 sale, Roofstock should take in $5,500 total between the buyer and seller.

Property Ratings: Roof stock uses a five-star system to rate neighborhoods instead of the typical letter class system (A, B, C, and D). I prefer the typical letter system that is commonly used to discuss properties on investment forums and sites.

Roofstock Certification Process: Roofstock, through their certification process, provides a tremendous wealth of information on their listed properties. The properties aren't necessarily "turn-key," but it appears that many of the properties were once foreclosures that were purchased by companies that renovate the properties, place a tenant in them, and then chose to sell the property through Roofstock, so most of the properties we've looked at seem to be in very good shape.

Waived Inspection Contingency: "Since diligence information is provided prior to investment, there is no need for a traditional Inspection period or contingency. Investors should carefully review all of the materials in the Diligence Vault before investing." This issue with this is that depending on when the property went through the Roofstock Certification Process and was inspected, the inspection could have occurred months prior to your offer being accepted and issues may have occurred since then that you will not necessarily become aware of unless it is noted by the appraiser.

Offers and Negotiations: The price negotiations on the site are beyond simple because you cannot discuss with the seller why you are giving the offer you are giving. If the seller accepts offers you can submit your offer and the seller has two days to accept, reject, or counter offer. If they reject or counter offer there is no explanation as to how they have arrived at the new value. This continues until either both parties arrive at a number they agree on or the process fails. On one property I put an offer in that was rejected by the seller, I received an e-mail from Roofstock telling me the seller rejected the offer because it was less than half the asking price and that they think the asking price is fair based upon estimates from Zillow, Trulia, and Realtor, and that Roofstock accounts for any repairs needed when the seller and Roofstock determine the list price. I was also told that most of their properties sell for 97% of list price. If you receive a message from Roofstock like this after having an offer rejected, just ignore it, don't let it sway your personal determination on the property. Good properties on the site go very quickly and if you notice a property sitting on the site for months and month, then there is likely a reason for that. Also, their inspection report is not fool proof. The inspector may not notice things and use your best judgment when looking through these reports and material found on the property from other websites, as there can be indications that there can be issues with the property that are likely more significant than the estimates being represented in the inspection report, and that Roofstock is not factoring into the list price for the property.

The Actual Process: Roofstock holds your hand through the entire process from start to finish. The employees at Roofstock we've interacted with have always been polite, helpful, and took the time to answer any questions we've had throughout the process and work with us to address concerns. They also connect you with 3rd party partners they have for obtaining financing, insurance, and property management and will coordinate with those partners through the process.

Convenience: Roofstock literally allows you to go through the entire process of purchasing an out of state investment property without ever needing to leave your home.

Website Interface: I found their site to be very straight forward and easy to use. I compare it to a site like HomeUnion, the main competitor of Roofstock, which I find a bit confusing.

Interested Party: No matter what though, always remember that Roofstock is an interested party. That means that through your interactions with them prior to any deal being accepted, it is in their interest for the property to sell for as much as possible. Remember that between the seller and buyer they are walking away with 5.5% of the sale price. Do your own homework on properties, look at sites like Trulia, Zillow, Realtor, the local county's property lookup page, check school rates, crime rates, check out the area using Google Maps, and do your own math to see what you think the property is worth and don't let anyone from Roofstock tell you that they think you've given the seller too low of an offer.

Would I Use Roofstock Again? Yes. I felt that even though I had issues with the certificate of compliance, the inspection/appraisal report, and closing, I would use Roofstock again and would recommend it to others. Obviously, that recommendation may change as we move forward and have more experiences with Roofstock, and become more experienced investors, but as of right now I have been pleased with the experience, communication, and ultimate result of using Roofstock for our first out of state rental purchase.

[Vidit S.]

@Jason G. Great post. Fully agree that not running the numbers yourself is a recipe for disaster. I see that you have a property in Lithonia - Do you mind telling me what your taxes were for last year or what you are expecting this year? I saw this property on Roofstock in Lithonia and they are estimating property taxes at $2,800. But when I check the county records for last year, taxes were $1,003 and in fact Roofstock also shows $1,003 as taxes were last year. Taxes increase every year but that kind of jump seems un reasonable. 

[Jason G.]

Originally posted by @Vidit S.:

@Jason G. Great post. Fully agree that not running the numbers yourself is a recipe for disaster. I see that you have a property in Lithonia - Do you mind telling me what your taxes were for last year or what you are expecting this year? I saw this property on Roofstock in Lithonia and they are estimating property taxes at $2,800. But when I check the county records for last year, taxes were $1,003 and in fact Roofstock also shows $1,003 as taxes were last year. Taxes increase every year but that kind of jump seems un reasonable. 

 I have yet to see accurate tax data for listings on Roofstock.  It is typically shown as much more than it really is.  I brought it to their attention sometime ago but I suppose nothing came of it.

2018: $1,786.28

2017: $1,729.56

[Eddie L.]

@Jason G. May I ask if you (and your girlfriend) put down 20-25% of your own money each time for down payment? Or did you somehow refinance an older property to fund the next house down payment?

[Jason G.]

Originally posted by @Eddie L.:

@Jason G. May I ask if you (and your girlfriend) put down 20-25% of your own money each time for down payment? Or did you somehow refinance an older property to fund the next house down payment?

20% down for the four SFH and 25% for the Dupelx. Some funds came from taking out a HELOC on my primary.

[Eddie L.]

@Jason G. Very cool. I noticed you guys plan to buy a couple more SFRs until you hit 10 mortgages. Did you ever consider having the title of the house under both your names but only  have a mortgage under your name (or her name?)

Therefore, you can add more than 10 between both of you?

[Jason G.]

Originally posted by @Eddie L.:

@Jason G. Very cool. I noticed you guys plan to buy a couple more SFRs until you hit 10 mortgages. Did you ever consider having the title of the house under both your names but only  have a mortgage under your name (or her name?)

Therefore, you can add more than 10 between both of you?

That is an option we decided not to pursue. All properties and loans are in both our names except for my primary. So we currently have four slots left, though the primary will probably be paid off by the time we fill that last slot in a few years. There are lenders that offer non conventional loans for properties 11 and beyond or we can put all the properties under a portfolio loan and I believe that should open up slots once again for conventional loans. So as long as we have a healthy portfolio, income, and DTI at that stage I do not see why we cannot keep going.

[Jason Pennacchio]

I've followed this post since your first purchase. Congratulations. I too was looking at roofstock in Atlanta and ultimately steered away due to low cash on cash returns, although I don't doubt they exist. I too found Excalibur to be competitively priced in Atlanta market and responsive so I worked with them directly to find and purchase a rental in Dekalb county last year. I could've closed from NY but decided to take a trip down to Atlanta to take a picture with my first purchase and to meet with the excalibur team (I'm now trying to figure out how to write that trip off on my taxes, any advice is welcomed). Excalibur has had some shake ups in the past but I've wound up with prop. mgrs. that are generally responsive. I purchased for below appraisal and asking if that means anything, had a tenant in there when purchased for $950 rent who left at renewal and after some repairs we got a tenant in for $1050, might've been higher had it not been late fall/winter but we got a 16 month lease with spring renewal. In my research initially with podcasts and roofstock I ultimately created my own rental calculator. I'd advise running 3 calculations whether using roofstock or not gathering data numbers from your own sources: worse case scenario, likely scenario, and dream scenario. I was comfortable with this house because worse case was still in the green and likely scenario was ~$150 or more above maintenance, and capital expenditures. I'd consider looking at roofstock again if I purchase again, not sure if there inventory has increased since. Jason I agree, a lot of investors especially on these forums dont understand what it means to be over leveraged and are led to believe an LLC will protect you even if you're not walking and talking like an LLC. I think your steady approach is the way to go. I also did 25% down conventional paying points assuming I'd own the home beyond the break even for the points (think it was ~6 or 7 years). I've read having extra equity in investment properties isnt necessarily beneficial except for ease of mind and balance dti but I guess with so many homes you'd want to clear a few. Congrats on your path. I'm sticking to my one rental atm, saving for wedding, honeymoon and personal home in NYC which is taxing. Maybe grow my portfolio like you in the future. Best of luck.

[Kevin Polite]

Just saw this post and the initially post was the probably the best I've seen on what happens when buying turnkey. I've never found a turnkey that would be profitable in Atlanta and have always sourced my own through yellow letters and back in the good days when you could find them on MLS. I've always self-managed my properties and wonder how it could be profitable having a property manager with the price of properties today. Even wholesalers prices are like MLS prices these days.

[Eric Williams]

Most real estate brokers will sell for 4-5%. Less even w/ Redfin. This seems to be most expensive costing the seller 5% and buyer .05%. What is the incentive to the seller if it will cost the same? Seems like you would get a better price on open market through broker. 

[Jason G.]

Originally posted by @Eric Williams:

Most real estate brokers will sell for 4-5%. Less even w/ Redfin. This seems to be most expensive costing the seller 5% and buyer .05%. What is the incentive to the seller if it will cost the same? Seems like you would get a better price on open market through broker. 

The FAQ on Roofstock's website is currently saying 2.5%.  The seller can also leave the tenant in place, avoiding issues with providing a vacant property or handling potential turnover issues that may arise and the seller can sell portfolios at one time.  Aside from that, I will defer to anyone that wants to respond who has actually sold a property on the site. 

[Eric Williams]

Reading every page of this thread. Good info. Looks like the sellers fee is 2.5%. I live in Boston and most rentals are in 1 year leases so you can not really deliver units vacant. Still feel like as a seller even paying the extra points (especially using Redfin who takes the least) you could sell for overall higher price factoring in fees using an agent. Maybe they get deals for listing multiple properties or it works in markets that are not as hot going through traditional broker. 

[Eric Williams]

Was it really absolutely necessary to paint and replace the carpet? I have units in Boston that rent good $ and I don't paint after every tenant. If they stay a few years and the walls noticeably need it than I do it. I would personally rather do hard wood or even laminate flooring. 

[Jason Pennacchio]

I feel like sellers have incentive to sell on Roofstock because you can inflate prices beyond comparable market prices. Out of state buyers have less ears on the ground to find deals. This is not to say you cannot find a good profitable investment rental on Roofstock as Jason Gines has proven, but if your rental numbers look good you can appeal to investors on Roofstock looking more closely at those numbers and less at what houses should be going for in a market (although housing prices are largely dictated by and/or coincide with rental values ex. cash on cash, cap rate, etc). I learned this when I was looking at houses on Roofstock in Indianapolis which was a booming rental market at the time. Saw a house listed at $125,000 with good cap rates and cash on cash but when I did my own research I realized comparables were selling for more like 75k to 80k. It was sold quickly for the inflated price. It's not to say the buyer wouldn't have made money on the property but the seller def listed for more on Roofstock knowing it looked appealing investment-wise and they can get away with it because out-of-state buyers don't know the market as well.

[Eric Williams]

Jason, real good point. A customized search on Redfin or Zillow with comparables is easy to do. Crazy to think some people don't do any further research besides what they see on Roofstock. 

[Heshel Mangel]

This is what makes it hardest to pull the trigger on Roofstock. Whilst it may make money for the buyer in the end, knowing that the actual value of the property based on comps and market is much lower makes it difficlut for me to pick it up. They are able to inflate the price because they know an investor will buy it above market value. 

[Jason Pennacchio]

I'm sure plenty do their own research, and if you do it seems you can be rewarded with appropriately priced deals, there's a lot of analysis to do but as the gurus always say, the price only matters when you buy a home and when you sell it (and the only time you can find a deal is when ya buy it). I'm still in the school of thought that appreciation is secondary and rental income/profit is primary but it makes for much slower wealth building. I would like to hear input from a seller, I'm curious if Roofstock influences your sale price (higher? lower?)

[Chris Scott]

@Jason Pennacchio Your earlier comment is an issue I have been thinking a lot about as I look through the roofstock offerings. Whenever I look at comps in the area on Zillow and Realtor.com, most of the Roofstock properties appear to be very overpriced. Seems like the sellers and buyers would be running the risk of the appraisal coming in low. 

Wondering if I should be making low ball offers that reflect what I find when researching comps. @Jason G. maybe you have input on this as a Roofstock buyer?

[Jason G.]

Originally posted by @Chris Scott:

@Jason Pennacchio Your earlier comment is an issue I have been thinking a lot about as I look through the roofstock offerings. Whenever I look at comps in the area on Zillow and Realtor.com, most of the Roofstock properties appear to be very overpriced. Seems like the sellers and buyers would be running the risk of the appraisal coming in low. 

Wondering if I should be making low ball offers that reflect what I find when researching comps. @Jason G. maybe you have input on this as a Roofstock buyer?

A few personal observations. I have purchased one SFH outside of Rootstock utilizing my PM to find a pre listing and got a very good deal. I wasn't able to replicate it after. I kept finding what looked like great properties but they would repeatedly fail inspection and require tens of thousands of more in work and the sellers wouldn't go down or go down enough The really good ones would be scooped up very quickly after listing by cash investors or bid up from their attractive list price. The Roofstock prices are negotiable and the properties, while not turnkey, are typically in very good shape. If you are flushed with cash, have experience in being able to eyeball issues with homes just by doing a walkthrough yourself, and are local to the market then using Roofstock isnt the best way to go. But remember, no one is being forced to use Roofstock. Get a local agent to the market and start hunting for properties and decide for yourself if the perceived premium you are paying using Roofstock is worth it or not.

[Kevin Charles]

@Jason Gines thanks for this thread and taking so much time to detail your experience. It's very helpful to read this. I've been looking through Roofstock's inventory and a lot of times their numbers can be off (ie: vacancy rates, property tax, loan rates, etc.) After researching and putting in the numbers I've researched I get much lower Cap rates and COC than what's posted. I'm curious as to the criteria you used to pick your roofstock properties (Cap rate, COC, neighborhood rating, etc). I've been looking for 3 star+ properties with Cap rates of 7+ and at least COC of 8+ with 20-25% down.

[Jason Pennacchio]

@Jason G. makes another great point, you're paying a slight premium at times to have pre-vetted, pre-inspected (although at times questionable inspections), pre-researched homes. When I switched from roofstock to a property manager/agent I had one inspection come back horrendous and you have to really think in a tight margin environment how many times can you afford to spend $300-$400 just to find a home is not doable. Unfortunately the way to get around this as an out-of-state investor is to have a property manager do a walkthrough who is knowledgeable in eyeballing major issues, (structure, roof, hvac, electrical) so you can have a general idea as to whether to continue on to the inspection or run the other way. I bid on a home which the agent visited and said don't even bother, unless the seller wants to drop 20% of their asking or so off the bat. (ALWAYS have a due diligence clause), (most sellers know what shape their property is in and most likely won't come down in a competitive market unless they're old listings or repeatedly failing inspections).

@Kevin Charles I think you have the right idea but I will say this to you in no offensive manner, "you and everybody else". Roofstock definitely gives you an idea what's going on but any homes that look like a deal are being viewed by hundreds/thousands (assuming). To get an edge and find a true deal you're going to have to put some sweat-equity into researching homes more in depth and run your own numbers/analysis. When YOU see it as a deal and Roofstock doesn't give that impression you're more likely to get a good price. (Ex. Roofstock has a home listed as "2 star", 5% cap, ok neighborhood, but ur personal research reveals its actually 3 star, 7 cap, good neighborhood). I personally will reiterate the need to know the market where you're looking. Using general filter isn't good enough, you need to learn the neighborhoods and even streets if you can so you know what you're bidding on. You can do this from out-of-state with some extra effort, lots of it.

[Kevin Charles]

Originally posted by @Jason Pennacchio:

@Jason G. makes another great point, you're paying a slight premium at times to have pre-vetted, pre-inspected (although at times questionable inspections), pre-researched homes. When I switched from roofstock to a property manager/agent I had one inspection come back horrendous and you have to really think in a tight margin environment how many times can you afford to spend $300-$400 just to find a home is not doable. Unfortunately the way to get around this as an out-of-state investor is to have a property manager do a walkthrough who is knowledgeable in eyeballing major issues, (structure, roof, hvac, electrical) so you can have a general idea as to whether to continue on to the inspection or run the other way. I bid on a home which the agent visited and said don't even bother, unless the seller wants to drop 20% of their asking or so off the bat. (ALWAYS have a due diligence clause), (most sellers know what shape their property is in and most likely won't come down in a competitive market unless they're old listings or repeatedly failing inspections).

@Kevin Charles I think you have the right idea but I will say this to you in no offensive manner, "you and everybody else". Roofstock definitely gives you an idea what's going on but any homes that look like a deal are being viewed by hundreds/thousands (assuming). To get an edge and find a true deal you're going to have to put some sweat-equity into researching homes more in depth and run your own numbers/analysis. When YOU see it as a deal and Roofstock doesn't give that impression you're more likely to get a good price. (Ex. Roofstock has a home listed as "2 star", 5% cap, ok neighborhood, but ur personal research reveals its actually 3 star, 7 cap, good neighborhood). I personally will reiterate the need to know the market where you're looking. Using general filter isn't good enough, you need to learn the neighborhoods and even streets if you can so you know what you're bidding on. You can do this from out-of-state with some extra effort, lots of it.

Couldn’t agree with you more @Jason Pennacchio. Thanks for the message and advice. There definitely are deals that are gone within a day. You also have to do your own due diligence because sometimes the numbers Roofstock uses may not be accurate and that 8 cap is really a 6. I guess my question for you and  @Jason Ginesis is more if do you wait patiently for those houses that fit that ideal criteria and make an offer immediately, focus on finding the coals that really are diamonds like the 2 star 5 caps that are really 3 star 7 caps as you mention, or focus on higher risk for higher returns? 

[Jason G.]

Originally posted by @Kevin Charles:

Originally posted by @Jason Pennacchio:

@Jason G. makes another great point, you're paying a slight premium at times to have pre-vetted, pre-inspected (although at times questionable inspections), pre-researched homes. When I switched from roofstock to a property manager/agent I had one inspection come back horrendous and you have to really think in a tight margin environment how many times can you afford to spend $300-$400 just to find a home is not doable. Unfortunately the way to get around this as an out-of-state investor is to have a property manager do a walkthrough who is knowledgeable in eyeballing major issues, (structure, roof, hvac, electrical) so you can have a general idea as to whether to continue on to the inspection or run the other way. I bid on a home which the agent visited and said don't even bother, unless the seller wants to drop 20% of their asking or so off the bat. (ALWAYS have a due diligence clause), (most sellers know what shape their property is in and most likely won't come down in a competitive market unless they're old listings or repeatedly failing inspections).

@Kevin Charles I think you have the right idea but I will say this to you in no offensive manner, "you and everybody else". Roofstock definitely gives you an idea what's going on but any homes that look like a deal are being viewed by hundreds/thousands (assuming). To get an edge and find a true deal you're going to have to put some sweat-equity into researching homes more in depth and run your own numbers/analysis. When YOU see it as a deal and Roofstock doesn't give that impression you're more likely to get a good price. (Ex. Roofstock has a home listed as "2 star", 5% cap, ok neighborhood, but ur personal research reveals its actually 3 star, 7 cap, good neighborhood). I personally will reiterate the need to know the market where you're looking. Using general filter isn't good enough, you need to learn the neighborhoods and even streets if you can so you know what you're bidding on. You can do this from out-of-state with some extra effort, lots of it.

Couldn’t agree with you more @Jason Pennacchio. Thanks for the message and advice. There definitely are deals that are gone within a day. You also have to do your own due diligence because sometimes the numbers Roofstock uses may not be accurate and that 8 cap is really a 6. I guess my question for you and  @Jason Ginesis is more if do you wait patiently for those houses that fit that ideal criteria and make an offer immediately, focus on finding the coals that really are diamonds like the 2 star 5 caps that are really 3 star 7 caps as you mention, or focus on higher risk for higher returns? 

Every market is different and you have to know the market. What your long term investment strategy is also is very relevant. With the Atlanta Metro Market for SFH I'm looking at areas where there is appreciation in property value and rent and where I can cash flow 100-300 a month after all expenses with the intention of keeping that property until the day I keel over and die. So over time rent will increase and as should cash flow and over even more time mortgages will pay themselves off and cash flow will skyrocket and maybe with the appreciation I could sell a few to pay off others. Right now we are just in savings mode to purchase our next investment, hopefully later this year or early next. It takes time to save the down payments and in the mean time I am on sites like Roofstock and Zillow every day saving properties that would interest me so I can keep track of current price trends. We aren't sure right now if we want to pick up another SFH, duplex, or go bigger with a quad. Each having their pros and cons and different analysis. Everyone's number analysis should be tailored to their own needs. If the numbers aren't working then you might have to look at different markets. After you've bought a few properties in a market though you should know your numbers. You should know how much YOUR PM charges you (not a guestimate Roofstock or someone else is giving you), you should know approximately what YOUR insurance carrier will charge you for a premium, and you will know how much YOU plan on putting towards reserves. Just remember none of this is a get rich quick endeavor and will take many many years of slowly building a portfolio. If you want more bang for your buck you can always buy distressed properties and fix them up yourself. But if you are buying properties in very good shape in decent neighborhoods in hot markets your margins are going to likely be tight.

[Lan Nguyen]

@Jason G. This has been really helpful

[Emil Shour]

@Jason G. thanks for sharing this super in-depth account of your experience investing through Roofstock! Appreciate you being transparent about what you liked and what you thought could be improved. By the way, read your comments regarding tax rates being set a little too high. We typically try to be as conservative as possible with cost estimates to make sure we're not over promising/under delivering returns to potential investors. I think every investor should also run their own numbers too, just to see what that looks like as well. But on the product side, tax estimates is something our data science and underwriting teams continue to refine as we process more transactions in each market.

[Hnin Thiri]

@Jason Gines

My PM ask me to fill out W9.I have no LLC yet.

so I am not sure How PM will handle my SSN on W9.I will ask W9 from them too.

1) How did you do with W9?

I choose realprotect for my rental insurance.

2) How you choose lower or higher deductible for your first property?

Thanks inadvance

Thiri