All Forum Posts by: JC Wu

Marco. It’s clear that Norada has been put to the test of time (been around for over 15 years, ~10 years longer than Roofstock) and are trusted by many busy professionals who want to create passive income for themselves.

What I meant by “crappy website” is that it’s not particularly visually appealing. Your site has got all the essential features and functionalities alright. “Crappy” is a poor word choice and quite harsh now I think about it. Sorry about that. I shouldn’t judge a book by its cover. The quality of service is definitely much more important than a pretty website. But having a sleek cover design helps attract business.

One other thing I noticed as soon as I checked out Norada site was that the list price of most properties is above estimates by Redfin, Zillow, Realtor, etc. After talking with one of the Norada guys, this is what I learned:

Several years ago, most properties were renovated, delivered rent-ready, with a screened, qualified tenant in place by the time of closing. As inventory levels have tightened and competition for turnkey homes increased, more investors are willing to purchase properties in the middle of rehab (such as the majority of Roofstock listings sold as-is). That's the market climate today in about 85% of markets. There are only a handful of properties in each market that are being delivered rent-ready (Norada listings). The pricing on Norada properties reflects the ARV (post-renovation) which tends to come in at market value. The pricing data on Zillow, Redfin, etc. likely doesn't reflect properties that have been recently updated or rehabbed.

You might wanna remind your potential clients to keep this in consideration because some investors might just assume your properties are overpriced without bothering to look deeper into it.

I’m just gonna consolidate my replies in one single post here:

@Account Closed Super helpful info. Thanks so much. The amount of due diligence your company does is very extensive and is a good amount of work for sure. There’re many check items on your list that I’ve never thought of checking. For this Florida property, I had to go with the inspection report Roofstock provided. The PSA prohibited me from picking my own inspection company and perform a 3rd party inspection.

The critical problem newbies face is they don’t know what they don’t know. If they know what they don’t know, I bet they have ways to find out.

I checked out your website. Very interesting. Never heard of your company before. Are you guys just starting out? Does your company do extensive screening on all the properties that you match investors with based off that checklist? What markets are you in? I don’t see any properties on your website.

I got in touch with HomeUnion before. They gathered similar information that your company gathers from investors like investing goals, financing plans, risk tolerance, ROI, price point, etc. The guy I spoke with tried to match me with properties that he thought would be a good fit. The problem is he called every 2-3 days. I felt rushed to make offers. It felt like he would keep calling too frequently until I buy a property from them. That drove me away - I prefer to shop around at my own pace. They list available properties on their website. I had the same email and phone call bombardment problem with Mashvisor.

@Tim B. The checklist that Elliot provided here should be very helpful to you. I’ll answer the rest of your questions in private messaging.

@Jason G. @Heshel Mangel Guys. Check out this article:

https://techcrunch.com/2017/10/04/roofstock-a-marketplace-for-single-family-homes-with-tenants-just-closed-on-35-million-in-new-funding/

At the bottom, it says “While there are certainly exception, properties that sell typically go under contract within 30 days of being listed on the site. During the second quarter of this year, 44 percent of the homes sold went under contract within 14 days. Some particularly popular homes are sometimes snatched up by investors within minutes of hitting the site.”

Based on this, and the common practice that most sellers give it a couple of weeks before start reducing list price, I believe the 97% is of ORIGINAL list price, but only Zach from Roofstock can confirm since he’s the one who gave Jason that figure. 

I bought this Florida property from Roofstock at the list price (95K) hours after it hit the site; bought the NC property at 97% (95K) of the original list price (98K). I was a first time home buyer when I bought the Florida property. It looks like I fit that typical Roofstock investor profile. I know 98K was the original list price because when I first saw it on the site I wasn’t allowed to make offers. Like Jason wrote in another post of his that all new properties posted on the site can only be purchased for list price during the initial three days it is listed. After that, those properties where the seller is willing to take offers under the list price will then have an option to do so.

Jason. Overpriced properties can still cashflow. Vice versa, an investor buys a property that cashflows doesn’t mean it was fair priced or a good deal. Those are two different concepts.

Some investors think that since sellers pay less commission on Roofstock compared to the MLS, they'd be more generous with a discount to the buyers, which may not be the case.

@Tony Kim@Engelo Rumora I believe a lot of people buy properties from Roofstock could simply be they’ve never heard of the turnkeys you listed. I had only heard about Roofstock, HomeUnion and Mashvisor before I decided to go ahead with Roofstock. A common feature those companies share is relatively aggressive marketing. Roofstock put out ads on Google, YouTube, Facebook, etc. Their ads pop up all the time when I surf the internet. They’ve also got quite a few sites to publish review articles that rank high on search index. All of that cost $$$.

I asked a guy from Norada why their website looks crappy - doesn’t make a good first impression on potential clients. He said they don’t have a tall pile of VC $$$ to sit on like Roofstock does and they can’t spare 150K a year to hire a front end engineer.

Also, a company’s profile is drastically elevated when it’s backed by VC money.

Roofstock executive team’s elite university educational background helps.

Roofstock makes more assertions on their site than some other sites and some investors buy into them. Many are misrepresentations in my personal opinion.

Roofstock operates in more markets than most other companies. Some investors take that as a sign of popularity and competency.

@Brian Ploszay Thanks for the encouragement. Do you mind sharing the links to the posts you mentioned about those “turnkey properties”? You’ve contributed to thousands of threads on countless topics. It's a little hard to sift through them to find those posts. There’s been some discussion centering on this topic on this thread this morning. If not, no problem at all, I’ll respect your privacy.

@Santosh K.@Michael Canlas@Joanna Li@Jason Alloway@Jason Wong@Matthew Ryan@Volker Durre@Amit Jadhav meant to @ you in my last post

It’s been months since I started this thread. Since then, many people have shared their opinions and insights, both privately and publicly. Piecing together what they/you told me, what I read, what I experienced, and some interesting new developments, you might find this post very intriguing, perhaps a little disturbing.

@Baris Keser concluded that most of the listings on roofstock are overpriced compared to all the homes that are sold/for sale in the area and also current rental income and market rental income is about 10-15% over the comps as well. He has done his study for Georgia 31097 zip code and found for sale homes about 30% discount of the house that is listed on roofstock.

@Tony Kim mentioned that Roofstock listings aren’t exactly what he would call good deals.

@Brian Ploszay wrote that Roofstock properties in his market are overpriced.

Here’s what I find very interesting:

In another BP thread that @Jason G. started (the same Jason who wrote Roofstock a long ravishing review and posed those good questions I used as template on this thread), he wrote that he was told most of Roofstock properties are sold for 97% of list price. I don’t know who told him that. I presume it was somebody from Roofstock given the seemingly good relationship he has with Roofstock. Here’s the link https://www.biggerpockets.com/forums/92/topics/468304-roofstock-case-study

In an article, Roofstock CEO said that roughly 93 percent of investors on the platform are buying out of state and 75 percent are first-time buyers. Here’s the link https://www.curbed.com/2019/9/10/20852849/millennial-buy-a-home-homeownership-remote

If what they say is true, it seems that there are too many naive and inexperienced newbies like myself overpaying for the properties listed on Roofstock, while being unaware of the depth of the water.

However, I’d like to point out that buyers are free to offer less than the list price and it’s up to sellers to accept or decline the offers.

A very interesting new development:

The Roofstock certified property management company in Florida that ripped me off and screwed me over appears to have had hundreds of fake positive reviews written on multiple review sites. Yelp issued consumer alert on them. It seems that even their CFO impostures as investor to write themselves five-star reviews and the employees compliment themselves and each other.

I complained about this company and pointed out their shady conduct to Roofstock. To my disappointment, Roofstock kept it on their certified provider list. This PM company has also been an active seller on Roofstock.

I filed a complaint with the Florida Attorney General along with the evidence I had analyzed and compiled, reminding them of the legal precedent of the NY attorney general imposing fines as high as 350K on a number of companies that wrote fake reviews and how a scammer behind hundreds of fake reviews on TripAdvisor received prison sentence last year. The attorney general office scanned all the hard copy pages I mailed, attached the PDF file to an email they sent me, saying that they are sharing my correspondence with their Consumer Protection Division. I don’t know whether they’ll eventually bring enforcement actions upon this PM company or not, but I doubt they’d bother to take the time to scan all 21 pages if they don’t plan to do anything about it.

I also brought it to Better Business Bureau’s attention that this PM company might be writing fake reviews on BBB. BBB took down their page a couple of weeks later. My guess is their BBB accreditation will be revoked.

Another interesting new development:

I sold this Florida property through a local wholesaler to an investor located in Israel, so the end buyer is not just an out-of-state investor, but an out-of-country investor.

The end buyer did some light rehab on the property and listed it for sale on the MLS. It has been sitting on the market for 186 days and the list price has been reduced multiple times. Zillow shows 1256 views but only 41 saves since listing. This investor will lose money for sure.

The biggest winner in this whole thing is the local wholesaler who made a quick 10K assignment fee. Myself and the investor after me (both unfamiliar with the local market) are the losers.

Last but not least, I’d like to point out that you don’t know if an investment is good or bad until you fully exit. It’s especially true for RE investments. You could be making 10K/yr of rent from one property for 10 years straight.

But if, say, there’s an undisclosed material fact or omission on the inspection report, polybutylene piping for instance (I’m just giving out a random example off the top of my head, not implying anything), those pipes suddenly burst 10 years after you buy the property and floods the house, the water damages could easily exceed the sum of the profits you’d made for the past ten years. Most investors who buy rentals from online platforms (not just Roofstock) out of state keep them as buy-and-hold. Many of those platforms are too new for certain types of “ticking time bombs” to explode. It’d be interesting to see how that plays out in the next few years. In the meantime, ignorance is bliss.

It looks like most ppl on BP only read the first page of any thread. The more interesting stuff is on the later pages really. I assume people who’ve contributed to this discussion are interested to know more and many people only check posts they’ve been @ed in. Sorry to disturb you if you don’t want to be @ed. Please don’t feel pressured to reply.

@Heshel Mangel@Account Closed

My ultimate goal is also to build processes that make it where I don't have to visit often. Assembling a team I can trust is definitely the way to do it. If I can achieve that, even those more hands-on investing strategies can become feasible. Sometimes, you just need to find that one key trustworthy person to get the whole team. But it takes a stroke of luck to stumble upon a person like that, often after being screwed over multiple times by shady ppl. It's only possible to know for sure whether people are trustworthy or not through the test of time and working on projects together, to see how they handle conflict of interest and how they take responsibilities when things go south. 

I figured you bought your Modesto properties during the downturn. It was probably a once in a lifetime opportunity to acquire investment properties. Unfortunately, I missed it. I'm hoarding up cash now hoping to scoop up some properties during the next recession, but each recession is unique - be it the triggers, the different sectors that get hit, severity, etc. How much did housing prices drop in Modesto during the last downturn? I know in places like Palo Alto, home value only dropped about 10%, compared to as much as 50% in some other places. I feel that a lot of times, investment is all about timing. If the timing is right, strategies don't even matter - bitcoin for instance. I'll reach out to you to inquire more about the Modesto market when the next recession hits. :) Thanks in advance. 

I feel that betting on long term appreciation is a long shot, simply because the future is too unpredictable and the market is dynamic. 

I'm actually not against long-distance investing. What I'm against is buying properties from Roofstock, and other online platforms that claim to revolutionize RE investing and simplify the process. They're like Amazon for properties. Technically, anything can be bought online nowadays. But the fact is it doesn't work for many things. Even for simple merchandize like shoes, eight out of ten bought online don't fit. 

Which Midwest markets are you in? Do you only use the out-of-state properties as rentals? Did you acquire them through local agents? 

I feel that investing ~2500 miles away isn't fundamentally different from investing ~250 miles away. Those markets are all far away enough that I have no familiarity with them; gotta rely on a local PM for the day to day hassles of being a landlord; can't frequently attend open houses; won't visit unless something goes seriously wrong, have to take a plane to get there, etc. 

Do you also use more hands-on strategies like BRRR in your local Modesto market besides keeping them as rentals? Many investors and companies aren't interested in the monthly cash flow from rentals. They profit more and faster from flipping, wholesaling and other strategies that're impossible or really difficult to implement outside local markets.

When did you buy your Modesto properties? The ones that value between 200K to 300K now only rents between 1K-2K/mo. 

 Maurice. Bakersfield is more like 5 hrs drive away from me and Fresno 4 hrs (I live in San Francisco). But presuming there're good semi local markets within 2 hr drive, would you still mainly rely on a property manager?  I guess potential problems that come with acquisition can be resolved since I can see the property with my own eyes and meet an agent in person before I enter a PSA, but what part of "being a landlord" would you do it on your own and what part can be relegated to a PM? Unless I have to, I wouldn't make a 4 hr round trip, just because it's too time-consuming. 

 Haha, yes, I've replayed that video many times. The part where the kangaroo's arms fly up right after taking a punch to the face and that WTF expression never fail to make me laugh. That kangaroo is probably either a wuss or juvenile that doesn't know how to use its tail and deliver kicks. The guy won't stand a chance against a 6'7" 200lb alpha male like this one:

I visited Australia a couple of years ago. Had a kangaroo steak. It was a bit too stringy. If it was ripped like the one in the pic, no wonder why it didn't taste tender enough - too much muscle and not enough fat. 

This is a super hilarious video too kangaroo kicks kid into river  I feel guilty every time I laugh at it but I really can't help. 

Google and Facebook can easily be swindled and abused. I believe each account can only write one review for each business. It's time-consuming to create those accounts. So when a large number of fake reviews need to be written, the business owners often don't have the time to write them so they purchase fake review packages. It looks like the Roofstock certified Jacksonville PM has the majority of their fake reviews on Google and Facebook, mostly on Google. 

Yelp is not easily swindled. They introduced a consumer alerts program back in 2012. They not only issue consumer alerts on businesses that write fake reviews, they also issue consumer alerts on businesses that threaten reviewers with legal action for writing negative reviews. Yelp issued a consumer alert on this Jacksonville PM last year. When I visited their Yelp page, a message popped up and said, "A number of positive reviews for this business originated from the same IP address. Someone may be trying to artificially inflate the rating for this business."

The awesome Jacksonville PM uses the flat fee structure with the intention of avoiding managing low-end properties in "war zone" areas that require a more hands-on approach and pose higher risks to PMs. The low-end property owners would find their management fee too high and not hire them. 

They have an in-house RE attorney, so their evictions move along super quickly. This attorney is a co-founder of several PMs. He handles evictions, messy closings and disputes with clients, etc. He divides his time among several PM companies because none of the companies needs a full-time attorney. The PMs don't pay attorney fees when they need one; the attorney is vested in the success and growth of the PM companies for his own sake. 

They also utilize a department management style instead of the traditional portfolio management style. 

Every time I see "mate" I can't help think of that Youtube video of slow-motion kangaroo streetfight in a quiet Australian neighborhood with classical music in the background. Thanks, pal. 

I think Roofstock falls into the soft-core tech company category. I've noticed the typical Silicon Valley hard-core tech startups have a disproportionately high male to female employee ratio, a large portion of engineers hold advanced degrees from big-name tech schools like Stanford and MIT, the C level execs all have extensive tech background even the ones that deal with the business side, etc. 

checking out online reviews is actually not that straightforward and without traps. 

The Roofstock certified PM that screwed me over appeared to have had >750 fake 5-star reviews written, which successfully tricked me and swamped out the complaints. People have recently caught on and started calling them out. Their Better Business Bureau page has been taken down and being updated. I'd be surprised if they can keep their BBB accreditation. 

The other Roofstock certified PM started out with an overall 1.5-star rating when I hired them. Most of the complaints were from tenants. Their rating and reputation have been consistently improving since then. So far it has proven itself to be a great company. They aren't perfect and do occasionally make errors, but I've always been satisfied with their attitude and the way they fixed their mistakes. 

My observation tells me that PMs change over time, for better or for worse. Perhaps that Jacksonville PM started out fine when Roofstock decided to partner with them years back.

After I fired the Jacksonville PM, I found another one on my own, which turned out to be awesome. Instead of charing a percentage of the monthly rent, they charge a flat fee with no add-on fees and no fees during vacancies. They also offer three pricing plans, like those bronze, silver and gold health insurance plans. The higher the flat monthly management fee, the more services it includes. 

When I asked the business owner why flat fee structure over percentage, he said its the same work regardless if your house is renting for $1200 or $2000, so why would an owner pay them $120 (10%) for one house and $200 (10% of 2000) for another house. In reality the more expensive the house the less the work. Percentage based management is not logical and is a way for a property manager to offset the $60/month they make on the $600/month rentals and that's where all the work is!  I think it totally makes sense. 

That's probably a more clear cut fee structure than your 10% on middle and higher end properties and 12% on low-end ones. It's the same concept though. 

Hey look! A newbie offering you two cents. :-) Hope that helps mate. 

@Engelo Rumora

I think your 2c input is really worth 2K. Thank you for taking the time to write it up! What you said about turnkeys sticking to the local market and keeping it tight especially got me thinking.

I originally thought the reason why many true turnkeys stay local is that they lack the money and resources to expand like Roofstock. I conjectured that if given the resources, they would expand as much as possible. And since the high profile venture capital investors chose to invest millions in Roofstock instead of those local turnkeys, it must be that Roofstock got a better business model that makes more sense to investors.

Roofstock's rapid expansion to so many markets gave me the impression that their business model really caught on among investors.

@Engelo Rumora

After seeing how my close family member raised money from VCs for his Silicon Valley startup, I begin to see how VCs tend to be herd followers so I shouldn't give too much credit to their confidence in the companies they invest in. When my family member first presented his idea to a bunch of VCs, most weren't impressed, some said they'd be willing to invest after he finds a lead investor, but nobody dared to be the first to jump in and be the lead investor. When the prototype came out and it looked promising, one high profile VC took the jump, then everybody followed like a shark feeding frenzy. Several VCs that initially decided to pass, came back and asked him to take their money.

I also had the "follow the herd" mentality when I bought this Jacksonville property back in 2017. Roofstock was super popular at that time, maybe still is, I thought popular must be good and the more popular the better. 

When you said 3rd party PMs nickel and dime to survive, why don't true turnkeys have to do that to survive?

I checked out HomeUnion before, which seems to be a true turnkey that manages the properties they sell, operating in quite a few markets although not as many as Roofstock. At that time, I was told they charge 12% for the monthly PM fee. I thought 12% was a bit high.

The majority of Roofstock certified PMs charge between 6% to 10%. The one I worked with and fired in Jacksonville charged 8%. However as time went on, I realized with a bunch of add-on fees this PM charged, the PM fee actually averaged over 12% per month. They not only nickel and dime -- it looks like they went far and beyond to brazenly rip me off and deceive me. It seemed as though all they cared about was charging me fees while being extremely negligent. Based on the >100 online complaints from investors and renters against them, I wasn't alone.

It's scary to know you have done 500+ deals in your local market and still get screwed by contractors to this day. I'd assume after doing so many deals, you'd know who's trustworthy and who's not. Perhaps residential rental is a dirty business no matter what market you're in and how long you've been in.

Funny how both you and @Charles Kao mentioned the word "greedy."