Do you have rental properties? Do they cause you some headaches?
Being a landlord is not an easy job. To acquire a rental property and run it well often entails:
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Researching the rental market
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Walking through lots of properties
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Obtaining financing
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Rehabbing the property
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Finding tenants
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Background checks
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Maintaining the property
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Dealing with tenant drama
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Evicting tenants
It’s a lot of work!
Many landlords also have regular jobs and don’t have time to do everything required to run a successful rental portfolio. You have to ask yourself if you can break away in the middle of the day if a pipe bursts in one of your properties.
You can hire a property manager to help run the rentals. But property managers don’t find the rental properties and fix them up. They take over the maintenance part of it.
Speaking of the fix-up, you won’t have cash flow coming in while the fix-up is going on. It could be several months after you acquire the property before you receive your first rent check. In the meantime, money is flowing out of your bank account to pay for the rehab.
Can Technology Make Things Easier?
Silicon Valley seems to think so… that’s why a team of entrepreneurs out in California came up with the company Roofstock. Roofstock is a website where people can buy and sell turnkey rental properties.
Yes, turnkey.
As in cash flow on Day 1. As in no rehab needed. The idea is that potential buyers can pick a region they like and filter for criteria such as:
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High yield
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Great schools to attract primo renters
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Long-term appreciation
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Newly built
You can also set the filters to send you an email alert when properties meeting your search criteria become listed on the site.
Once they see a property they like, Roofstock will help facilitate the sale. For their service, Roofstock charges a 2.5% commission to the seller, and a 0.5% commission to the buyer. That is about half what Realtors would charge on both sides in a traditional transaction.
How does a buyer know they are buying a decent deal?
Roofstock has a vetting process for each property before they list it on their site. They provide a lot of information as part of the due diligence process:
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Property valuations and comps from local brokers
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A 3rd-party independent report of market rents
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An interactive map showing market dynamics such as gross yields, median income and property values
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Home price appreciation forecasts (for what they are worth)
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Potential operating expenses
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Pro-forma financial statements
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Home inspection and title reports
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Home disclosure reports
Pretty much everything you would want to do if you were buying a rental property on your own.
Roofstock also has a team of advisors to help you select a rental property that makes sense for your investing philosophy, if you would like to use them.
Interested in investing with IRA funds?
Roofstock can help with those as well. They have partnered with New Direction IRA to provide guidance and custodial services for investing in rental properties using a self-directed IRA.
Roofstock is not in all markets. They are selective. They research which markets make the most sense from a host of different market dynamics. As of the writing of this lesson, they are in:
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Atlanta, GA
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Tampa, FL
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Jacksonville, FL
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Las Vegas, NV
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Miami, FL
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North Carolina
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Orlando, FL
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Riverside-San Bernardino, CA
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San Francisco – The East Bay side
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Southwest Florida
Once you purchase the property, Roofstock uses its partner management companies to manage your properties and make it a truly turnkey experience.
They also have partners who can finance your properties.
Most Mogul members know this, but you should expect to put 20%-30% down when financing rental properties through their partners. Same amount that most traditional lenders require.
If you don’t like the property after you purchase it, Roofstock has a money-back guarantee. They will list the property for you for free in the first month you own it. If it doesn’t sell in 30 days, Roofstock will buy it back from you.
Not interested in owning your own rental property?
No problem.
Roofstock also maintains a fund that finances and runs a portfolio of rental properties. The ‘HomeCap Total Return SFR Fund I’ is a professionally managed opportunity for investors to pool their money and diversify their risk. You will still receive payments and tax benefits, but your money is not all tied to one property.
Seller Advantages
By making the buying experience so much easier, the idea is that sellers could move their properties much faster.
At first glance, people might wonder why sellers might want to get rid of a cash-flowing rental property?
There are lots of reasons:
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Free up cash for more lucrative deals
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Change of investment types
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Moving out of a geographic market
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Or maybe they are just tired of running rental properties.
Roofstock helps sellers by cutting real estate commissions in half. Roofstock can also provide selling recommendations such as a price that will move the property. Ultimately the price is up to the seller, but Roofstock will not list the property if it is way out of line from the local market.
More and more real estate transactions are going online. Maybe this strategy is for you.
What Do You Think?
Please feel free to post some thoughts in the comments section below.
Research Markets – Does your market make sense to own a rental property? Are rents moving up or down? Make this part of your due diligence.
Put Systems and Processes in Place – The best investors don’t try to save a few pennies by doing everything themselves. Find ways to make the little stuff run automatically so you can spend your time doing deals.
Use Other Avenues – Traditional buying and selling through real estate agents is not the only way to buy and sell properties. Be creative. Use tech and other methods.
JP Moses
is a real estate investor in Memphis, TN, with experience ranging from land lording to note buying, rehabbing, and wholesaling. However, wholesaling is the area that he enjoys most and where he bring the most experience and expertise to his students.