Wondering if it's a good idea to buy rental property? You definitely should be. Single-family rental properties have always made outstanding investments. But right now, with a huge population of Millennials coming of age and starting their own households, this asset class is stronger than ever. Anyone looking to grow their wealth and build that nest egg needs to take advantage of this opportunity. The only question is, what’s the best way to go about doing that?
As you probably know, the traditional method of buying and managing rental properties is not for the faint of heart. First you have to find a good realtor, research your local market, set your budget, and arrange financing. Then you have to visit and compare properties, calculate expected yields and returns, make offers, arrange inspections, and do a ton of paperwork. Finally, once you’ve actually acquired a property, you have to get it ready to rent, market it to suitable tenants, sign a lease, and carry out all the duties of a landlord. Given all that, it’s hardly a mystery why most people are nervous to invest their hard-earned money in rental properties. But here’s some good news. Buying rental property doesn’t have to be so hard. Thanks to innovative startups like Roofstock, today investing in real estate can be as easy as investing in the stock market.
Traditionally the number one reason to buy rental property like SFRs is that they give you two different ways to make money. First, they generate income every month in the form of rent, which ideally will cover your mortgage and leave you with a little extra for a rainy day. Second, when chosen wisely, SFR investment properties appreciate in value over time, allowing you to either use that equity to refinance and buy more properties, or just make a nice profit when the time is right to sell.
In addition to this unique dual cashflow, SFRs as an asset class offer a ton of stability. Studies based on data from the U.S. Census Bureau, S&P 500 returns, and the U.S. Treasury show that investments in the SFR market offer similar returns to the stock market, but with considerably less volatility. There is also very little correlation between SFRs and the stock market, making them an excellent choice for investors who want to diversify their portfolios with assets that hedge against market downturns. In fact, some experts have gone so far as to declare the SFR market “recession-resistant.” Just look at the 2008 financial crisis, for example. The stock market crashed and overall home prices took a major hit when the U.S. housing bubble burst. However, SFR rent remained steady throughout the economic downturn, and in some markets it even grew.
Of course, despite all these obvious benefits, a lot of investment experts still consider single-family rentals an “alternative” asset class. But now even that is starting to change.
Over the last 20 years there has been a slow but steady shift in home ownership in the United States. According to one estimate, renter-occupied households have grown 29 percent since 2000, while owner-occupied households have grown just 17 percent during that same period. Much of this has to do with changing demographics. According to the U.S. Census Bureau, in 2019 Millennials officially surpassed Baby Boomers as the largest living adult generation, and the rate of home ownership among Millennials is lower than with previous generations due to numerous social and economic factors. However, this trend has also been seriously accelerated by the pandemic.
When the pandemic hit in the spring of 2020, and everyone was stuck in their homes 24/7, it triggered a significant shift in consumer preferences. People who previously had been happy in small urban spaces suddenly wanted larger homes so their families could spread out into backyards and home offices. However, this increase in demand contributed to a meteoric rise in housing prices that has made home ownership impossible for a lot of people. According to real estate analytics firm Attom Data Solutions, last year average earners in 43 percent of U.S. counties could afford to own a home there. Today, average earners in 55 percent of U.S. counties can’t afford to own a home there.
With more people wanting bigger homes, but fewer people actually having enough cash for a down payment, the single-family rental market has exploded. Now, big-time institutional investors are taking an interest in an asset class previously dominated by small landlords.
“Three years ago I would have said this was a fad,” Mike Clow, Executive Director for Greystar Real Estate Partners recently told Bloomberg. “But it’s become more prevalent because it’s filling a need for consumers.”
Of course, the way big institutional investors approach the increased demand for single-family rentals is to actually build more single-family rentals. Right now it’s estimated that 4.5 percent of new home construction is being purpose-built for rentals, which is more than double the historical average. However, that’s not necessarily bad news for individual investors. Many build-to-rent developments are created with individual investors in mind. And some experts believe the percentage of newly built SFR properties sold directly to investors could hit 5 percent in the coming years.
The other great thing about newly built SFR properties is that they are uniquely appealing to the new generation of Millennial renters looking for modern homes with all the latest amenities.
“Imagine if consumers could only lease old cars, not new cars,” Rick Palacios Jr. of John Burns Real Estate Consultants recently told the Wall Street Journal. “That’s how single-family rentals have been.”
What does all this mean for people looking to buy rental property? It means there has probably never been a better time to buy single-family rental properties than right now.
Want to get in on the booming SFR market before it’s too late? You could go the traditional route, hire a real estate agent, and look for properties listed on MLS. But of course, if you do that, you’ll have a very limited selection of properties to choose from. And you will have to go look at each one of them in person. And you will have to do all your own research to figure out how each property would perform as a single-family rental. And once you make a purchase, you’ll be completely on your own. And it might take three-to-six months before you start making any money.
Alternatively, you could make everything way easier on yourself and buy rental property with Roofstock.
Roofstock is a comprehensive online platform created specifically to make investing in single-family rental properties radically simple and efficient. It uses state-of-the-art AI to curate an online marketplace of income-generating rental properties and gives buyers the high tech tools they need to shop for and purchase them online.
Roofstock was founded by finance, real estate, and technology experts who understood the benefits of investing in the single-family rental market, but who also realized the process of buying, selling, and managing was in desperate need of an upgrade for the 21st century. In 2015, they set out to build a completely new model for investing in single-family real estate—a model that uses the latest technology to remove geographical and logistical barriers to investing in real estate, making it easier for anyone to buy properties, from anywhere, at any time.
Today, Roofstock isn’t just the best way to buy investment properties online. It might just be the best way to buy investment properties period.
About 70 percent of all rental properties in the United States are owned by investors who live no more than one hour away. However, this is only because most investors didn’t have the ability to own properties they couldn’t manage personally. The traditional method of buying real estate requires you to be there in person for just about every step of the process, leaving you with fewer options as a buyer.
Today, Roofstock eliminates these limitations. Their online marketplace features high quality single-family rental properties located in different markets all across the country, and it allows you to purchase these properties from anywhere in the world. That means you don’t have to settle for rental properties in your area. You can invest in the hottest markets and maximize your returns.
Shopping Made Easy
When you shop for investment properties the old-fashioned way, you have to rely on your realtor to find homes that meet your criteria. Then you have to go look at each one in person. In short, it takes a lot of time, and a lot of work, and you don’t have a lot of control.
Luckily, Roofstock streamlines the entire process, making it radically efficient. As a prospective buyer, you can create custom searches and filter results based on extremely specific criteria, including things like estimated annual return, total return over the course of five, 10, 20, or 30 years, or expected appreciation. Prospective buyers can also use Roofstock’s built-in calculator to adjust the purchase price, down payment, and expected rent so you understand all their options.
Can’t find a property that meets your exact criteria? No need to worry. New properties are added daily, and you can sign up to receive new listing alerts when properties meet your search parameters.
Advanced Tools And Analytics At Your Fingertips
When you shop for investment properties on MLS, you get very little information that would help you make an informed decision as an investor. However, with Roofstock you get all the analytics, tools, insights, and proprietary data you need to make informed choices right from the comfort of your living room couch.
On the Roofstock marketplace, every single property has undergone the rigorous Roofstock Certification. What does that mean? It means every single listing includes pictures, floor plans, and 3D tours. Every single listing includes a property inspection report, independent valuation, title report, and insurance quotes, saving you the time and hassle of acquiring them yourself. Every single listing contains information about the current lease, tenants, and rent payment history. And every single listing contains a Roofstock Neighborhood Rating, which uses a proprietary algorithm to evaluate the neighborhood-specific risks and benefits of things like school district quality, employment rates, home values, and more.
In addition to all these tools and analytics, every single property listed in the Roofstock marketplace also comes with the revolutionary Roofstock Guarantee. After you complete the purchase of a property, if you are not 100-percent satisfied within 30 days of closing, Roofstock will re-list the property and issue you a refund when the property sells again.
In short, when you shop for rental properties on Roofstock, you get everything you need to invest with complete confidence. That’s why, to date, Roofstock has completed over $3 billion worth of real estate transactions.
Start Making Money ASAP
It’s very difficult to sell a rental property the old-fashioned way without removing tenants, or waiting until their lease expires. That means when you buy a property the old-fashioned way, you’re not going to make any money until you get it leased. And that could take some time.
One of the best things about the Roofstock marketplace is that every single property has been selected for its ability to immediately generate income. In most cases that means the properties are already occupied by reliable tenants. Thus, when a sale closes and you officially take ownership of a property, you don’t have to spend any time or money to secure a lease. Instead, you start earning money on day one.
Of course, not all properties on the Roofstock marketplace have tenants. However, most vacant properties are certified as “rent-ready” and covered by Roofstock’s industry-leading Lease Up Guarantee. If you purchase a vacant “rent-ready” property on the Roofstock marketplace, Roofstock guarantees you will get a signed lease within 45 days or they will cover rent for up to a year.
Try getting a guarantee like that from your real estate agent.
Buying rental properties with Roofstock is unbelievably simple. As with any other kind of purchase, the first step is figuring out what you want, and what you can afford. After that, if you’re not paying cash, you’ll need to arrange your financing. Pre-approval is not required to buy properties on Roofstock, but it is highly recommended since it will strengthen any offers you make and help expedite the entire transaction.
Whether or not you choose to get pre-approved before shopping, when it comes to financing, Roofstock gives you total flexibility. If you have a mortgage broker or lender you trust and want to use, you are free to arrange your own financing. All you have to do is upload your pre-approval letter via the Roofstock app. However, because Roofstock is a comprehensive full-service platform, you also have the option to apply for financing directly through Roofstock. They have a pool of trusted lending partners that often offer preferred rates to Roofstock users. And of course, one of the advantage of going this route is that, if you have any questions or run into any difficulties, Roofstock has a team of experts ready to assist you.
Once you have set your budget and arranged your financing, simply use Roofstock’s intuitive and powerful search tools to find properties that meet your criteria. When you’ve found a property you like and you’re ready to buy, there’s no need to call an agent, sign a mountain of paperwork, or fax or email a bunch of attachments. All you do is click the button that says make an offer.
Making an offer on Roofstock is absolutely free. If your offer is accepted, you will be charged a “market fee” equal to 0.5% of the contract price or $500, whichever is higher. This fee helps cover the costs of certification and underwriting, as well as the other professional support Roofstock provides. And it is the only fee you will pay when you purchase a rental property through Roofstock.
As you probably know, closing a real estate transaction is a complicated and stressful process involving a lot of deadlines and paperwork. Luckily, Roofstock makes that easier, too. This is partly because Roofstock performs the due diligence on properties prior to their even being listed. However, Roofstock also makes closing easier by providing a team of experts to guide you through escrow and give you all the support you need until the place is officially yours. Typically, the entire process takes just 15 days for cash sales and 30 days for financed sales. That’s about 40-percent faster than the average time it takes to close on a property purchased the old-fashioned way.
Being a landlord is not easy. It takes a lot of time and a lot of knowledge most people just don’t have, which is the number one reason why so many investors don’t even bother with real estate. But Roofstock makes being a landlord easy thanks to their established network of fully vetted and highly skilled property managers.
Of course, if you buy rental property in your area and you want to manage it personally, you are free to do that. However, for anyone who wants to invest in out-of-market properties that offer better returns, or those who simply don’t want the hassle of doing it all themselves, Roofstock’s nationwide network of property management firms is an invaluable asset. These firms have been specially selected for their experience in operating properties as investments, and they have specialized knowledge of their local markets. They can handle all the administrative and operational tasks required, including marketing, leasing, repairs, maintenance, bookkeeping, tax reporting, and tenant relations. That leaves you free to focus on building and optimizing your portfolio instead of interviewing prospective tenants and fixing clogged sinks.
Roofstock has over 85 property managers that have been fully vetted and are monitored for ongoing performance. If you want to make use of their services, simply indicate this to Roofstock’s service and transition team during closing, and they will put you in touch with management companies in your area.
Ready to move on from a property so you can start expanding your SFR portfolio? Well, Roofstock isn’t just the best place to buy rental properties. It’s also the best place to sell them.
Selling Made Easy And Affordable
When you list a property on Roofstock’s marketplace, you get access to a global network of investors who want exactly the kind of properties you are selling. You’re not limited to investors in your area, and you don’t have to deal with people who don’t know what they’re doing.
Roofstock also makes selling rental properties more affordable. Because they don’t require showings or open houses, so long as your property meets industry standards, you don’t have to spend as much on staging and upgrades. And because you don’t have to remove tenants or wait until a lease expires to sell, you get to keep collected rent right up until closing.
Then there’s the commission. When you hire a realtor to sell your rental property the old-fashioned way, you’re typically going to pay a 6-percent commission. However, when you use Roofstock to sell your rental property, you’re only on the hook for 3 percent.
Needless to say, all these savings can add up pretty quickly. Suppose you want to sell a SFR property worth $100,000 that brings in $1,200 per month in rent. If you hire a realtor and list the property on MLS, you would most likely lose three months worth of rent while the property is for sale. That’s $3,600. Meanwhile, the average capital expenditure to prepare a property for sale through MLS is 2 percent. That’s $2,000. And last but not least, there’s the 6-percent brokerage commission. That’s $6,000. So, on average, it will cost you about $11,600 to sell a $100,000 rental property when you do it the old-fashioned way. But with Roofstock you only have to worry about the 3-percent commission. That means, on a $100,000 rental property, you’re saving $8,600.
Learn The Tricks Of The Trade When You Buy Rental Property
Need help figuring out exactly when to sell and when to buy rental property? Worried about making rookie mistakes and flushing your hard-earned money down the proverbial toilet? Roofstock can help you with that, too, with their Roofstock Academy training program.
Created by experts who have decades of experience in SFR, Roofstock Academy is a hands-on training program that will teach you how to avoid costly mistakes when you buy rental property and become a successful real estate investor. Roofstock Academy offers one-on-one coaching, group coaching, private and group chats and forums, and over 50 hours of on-demand lectures covering SFR investment strategies for both beginners and experts alike.
Right now the demand for single-family rental properties has never been higher. And with more modern, highly desirable SFR properties being developed every day, now is the perfect time to buy. Don’t miss out on your chance to grow your wealth because you’re scared to try something new.
Roofstock is a groundbreaking online marketplace with a global network of real estate investors that gives you the tools, information, and expert support you need to buy properties online with total confidence. Whether you are totally new to the single-family rental market and are looking to buy your very first investment property, or you’re a seasoned pro just looking for a way to make it easier, you need to take a look at Roofstock. Signing up with them could be the smartest financial decision you’ll ever make.
Futurism fans: To create this content, a non-editorial team worked with an affiliate partner. We may collect a small commission on items purchased through this page. This post does not necessarily reflect the views or the endorsement of the Futurism.com editorial staff.
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