Roofstock Review: Purchase Investment Properties or Buy Into Real Estate Portfolios

Roofstock was started with the goal of "building the world's leading real estate investment marketplace." The company aims to make the process of buying or selling investment properties easier for those who use the Roofstock Marketplace. It also allows accredited investors to purchase a stake in fully-managed properties with as little as a $5,000 investment.

This Roofstock review can help you to better understand what this unique platform does and whether it's worth investing in

Roofstock is an investing platform focused on real estate investing. You can either find properties to purchase that you'll own directly on the Roofstock Marketplace or can buy shares of common stock in Roofstock One, which allows those looking for passive income to build portfolios that provide fractional ownership interests in fully-managed properties.

How does Roofstock work? 

Roofstock works differently depending on whether you're interested in the Roofstock Marketplace or Roofstock One. 

The Roofstock Marketplace allows you to use customized filters to search for individual properties to buy, or to search for bundled portfolios of properties to purchase. You can search based on the property list price, the return you desire, the location and other specific criteria. Once you've found a property, you can submit an offer for free. 

If your offer is accepted, you'll pay Roofstock's fee and Roofstock will manage the closing of your transaction for you. Roofstock will help you get your property to closing within 15 days for cash transitions or 30 days for financed transactions. Roofstock will also connect you with partners including lenders; insurers; and property managers. 

Roofstock One serves as an alternative to directly investing in real estate. If you are an accredited investor, you can buy into Roofstock One with a $5,000 minimum investment. This allows you to avoid going through the process of obtaining a mortgage, directly buying a property, fixing it up, and finding a manager for it. 

Instead, you can easily build a customized portfolio of properties that you own a fractional share of and that are completely managed for you. You receive pro-rata quarterly distributions based on the income the properties in your portfolio produce, minus any expenses. 

Who can invest with Roofstock? 

You can invest with Roofstock One only if you are an accredited investor. To be classified as an accredited investor, you must have $1 million in assets not including your primary home or you must meet certain income requirements. You must have had an income of $200,000 or more for the past two years or $300,000 or more in combined income with a spouse. You also must expect to continue to earn income at that level. 

You can invest with Roofstock Marketplace if you have the cash to pay for a rental property or can get approved for financing to purchase a rental property.  You will also need an Individual Taxpayer Identification Number (ITIN). You do not need to be a U.S. citizen or have a green card but will need two types of valid identification, which can include a valid foreign or U.S. passport and a photo ID, such as a driver's license.

Roofstock has a solid partner network to help with all aspects of your transaction 

Finding the right lenders, insurers and property managers can be tricky, especially for new investors in commercial real estate. Roofstock has a trusted partner network and can connect you with the support and services you need during and after your property purchase. 

Closing on a rental property is quick and easy

Roofstock manages your transaction and helps get you to closing quickly. It typically takes 15 days to close on properties purchased through Roofstock if you're buying your rental property in cash. If you're financing, it takes around a month. This can be a faster process than a traditional real estate closing. 

Roofstock One has low minimum investment requirements 

If you choose to invest in Roofstock One, you can diversify into commercial real estate investing with as little as a $5,000 investment. This is lower than many competitors, such as Origin Investments which requires a $50,000 or $100,000 minimum investment to buy into real estate funds.

You must be an accredited investor to invest in Roofstock One

If you want to invest with Roofstock One, you must be an accredited investor. Many people cannot meet these requirements, which typically mandate an annual income of $200,000 for individuals or $300,000 for married couples OR assets of at least $1 million outside of the primary home. 

Your investment is illiquid

When you buy a rental property on Roofstock Marketplace, you will take full ownership of the property and would need to find a buyer for it in order to cash out your investment. If you invest in Roofstock One, you must leave your money invested for at least five years. Both investments, in other words, require tying up your money for a long time. 

Fees can be high

Roofstock Marketplace charges a fee of 0.5% of the contract price or $500 (whichever is higher) when your offer on a property is accepted through the Roofstock Marketplace. This is on top of traditional real estate closing costs and can make your purchase much more expensive just for the transaction management Roofstock provides.

Your ability to make money on Roofstock depends on the underlying performance of the properties that you're investing in.

How do I make money with Roofstock? 

You make money with Roofstock Marketplace if the rental property you purchase produces sufficient rental income to turn a profit after expenses and/or if the property appreciates in value. Roofstock indicates that there are currently many rental homes listed for sale on their platform that offer a 7.5% or higher return on investment.  

You can also make money on Roofstock One when properties perform well. The properties are managed for you and you receive pro-rata quarterly distributions of any profits your properties earn after expenses. 

How do I cash out with Roofstock? 

You can begin earning rental income immediately from properties purchased through Roofstock Marketplace. Your property manager will collect and distribute rental income. If you want to cash out of your investment, you would need to find a buyer for your rental property. 

If you invest in Roofstock One, you will receive quarterly distributions when funds are available. Distributions are made on or before the 15th of February, May, August and November. There is currently no secondary market to resell your Roofstock One shares but you can sell them back to Roofstock at the end of your five year commitment period. 

Roofstock vs traditional investing 

Investing in Roofstock One or buying rental properties through Roofstock is a much less liquid investment than investing in stocks or ETFs. Your returns can vary substantially depending on the properties purchased, so it is difficult to compare performance with other assets. However, adding real estate to your portfolio can provide diversification and reduce your overall investing risk.

Roofstock has received some positive feedback from past users. "Sometimes the customer service reps are flakey, but otherwise I’ve had success with them," one Reddit user commented. 

However, others have commented that the properties on Roofstock are the "dregs of the market," and usually include homes that are overpriced, in need of a lot of work, or that have non-paying tenants.

If you're looking for a service that simplifies the process of purchasing rental properties or you're an accredited investor interested in buying fractional shares of rental properties with a low minimum investment, Roofstock may be a good option for you. 

The minimum investment for Roofstock One is lower than many, but not all, competitors. And Roofstock Marketplace connects you with the providers to make managing your property easy. But be aware of high fees for Roofstock Marketplace and strict requirements for investing with Roofstock One.