Roofstock brings investing in single family homes across the country to anyone’s desktop.
THIS ARTICLE WAS PUBLISHED IN THE ‘Q’ – THE REGISTRY’S PRINT PUBLICATION – IN FEBRUARY OF 2017[dropcap]G[/dropcap]ary Beasley has spent most of his career building businesses in the real estate, hospitality and tech sectors. Immediately before Roofstock, Gary was co-CEO of Starwood Waypoint Residential Trust (NYSE: SWAY), one of the leading Single-Family Rental companies in the US. With Roofstock, Gary and team are looking to bring a marketplace of leased, cash flow positive homes to anyone with an interest in this asset class with a promise of transparency, and reduced costs, through research and data.
THE REGISTRY: What is Roofstock?
GARY BEASLEY: Roofstock is a marketplace and transaction platform that allows investors an ability to invest in leased, cash flowing rental homes in the US from anywhere in the world through its revolutionary on-line platform.
TR: How did the idea about the company come along?
GB: My co-founder Gregor Watson came up with the idea when he was trying to sell 500 homes in Dallas a couple of years ago and could not find a broker who wanted his business. One said she did not have 500 signs. Another asked when he could get the tenants out. After doing all the hard work to renovate and lease all of these homes, why was there not an efficient way to sell them, which allowed investors attracted by the cash flow direct access to them?
TR: You are a Bay Area company, correct? Tell us about the industry experience you and your team has in this space?
GB: My co-founders and I have purchased, managed and financed over $4 billion of single-family rental homes in the past five years through our previous platforms. Most recently I was co-CEO of leading single-family rental REIT Starwood Waypoint Residential Trust, which we took public in 2014. We have deep industry expertise on our team, and Roofstock truly is a platform built by investors for investors.
TR: Tell us about the investment opportunities that Roofstock offers?
GB: Roofstock offers an ability for investors, whether individual or institutional, global or domestic, an opportunity to invest directly into cash flowing US housing in a transparent, technology-enabled, low-fee environment. Investors can search for properties that meet their criteria no matter what their investment style (growth, value, yield, etc.) and purchase them sight-unseen with confidence, leveraging Roofstock’s unique platform, which provides complete diligence information up-front, before the property is purchased. On-going property management is handled through a network of certified, local property management firms. Over time investors will also be able to invest in single-family rental portfolios from independent sponsors, which will be available through the Roofstock Web site. The goal is to develop a one-stop-shop for real estate investing that allows investors to research, invest, monitor and manage their investments all through Roofstock.
TR: Tell us about the investment locations? Why are they interesting, why do investors find them appealing, and how do you source them?
GB: We have launched Roofstock in some of the most appealing markets for rental housing investment, offering a variety of property types and investment opportunities. We are currently active in 10 markets around the US, and adding more all the time. Some of our investors are looking for current yield, others are looking for more expensive homes that provide lower yields but perhaps more stable cash flows or greater appreciation potential. We are currently working with over 50 different sellers, from some of the largest institutions in the industry to mom-and-pop investors. We expect to continue to diversify our supply relationships over time to offer a robust selection of investment properties for our clients to explore.
TR: Who are your typical investors and what are they seeking?
GB: Our investors range from individual investors, both domestic and global, to some of the largest institutions in the world looking for direct exposure to US housing. Generally, our investors are seeking total return, which is a combination of current yield (dividends generated from rents during the hold period) and future potential appreciation of the home.
TR: What is the typical investment lifecycle? Are you involved with the property once it sells, and if so, to what extent?
GB: Most investors who are purchasing homes off of Roofstock have a relatively long investment horizon, meaning five years or more, although some may choose to sell sooner should properties appreciate rapidly. Roofstock stays involved throughout the lifecycle of ownership by providing a digital layer of asset management that sits between the investor and the local property manager, which deals with all the day to day management duties. Roofstock sits in the middle to monitor performance and help optimize asset performance by providing transparency and benchmarking for clients and holding property management firms accountable for performance.
TR: This is not necessarily a novel idea, but are you deploying technology to your advantage, which then helps you source deals faster, better, more efficiently?
GB: The Roofstock marketplace is indeed quite novel, in that the inventory is vetted and curated in a manner not found anywhere else today. Unlike traditional real estate transactions where diligence is routinely done after a property is under contract, Roofstock turns that on its head by providing a diligence vault up-front with detailed information like valuation reports, inspections, title reports, etc. By front-loading the diligence, transactions can close faster and with fewer surprises and less friction.
TR: How does your business fare in today’s economy, and how will it perform when the economy turns?
GB: As a marketplace, our business is largely agnostic to where we are in the real estate and economic cycle. There are roughly one million investor transactions annually, in up and down markets. Our objective is to be the trusted platform that allows investors an ability to buy and sell properties efficiently and at a low cost no matter what the underlying market conditions.
TR: What are your organization’s goals in 2017?
GB: We plan to continue to grow our network of buyers and sellers, launch several new markets, introduce new financing options for clients, and roll-out our asset management app to help clients optimize performance and grow the broader Roofstock community.
TR: From an industry perspective, how do you see 2017? What worries you and where do you think we have opportunities?
GB: While real estate is a hyper-local industry, in general 2017 looks to be a solid year for housing, with robust demand for rentals in particular as household formation will likely continue to outpace new housing supply. This puts downward pressure on homeownership rates and upward pressure on rental occupancy rates and rents. This bodes well for owners of rental property of all types, including single-family rentals.
TR: Is there anything that we are not asking that we should be?
GB: There is much speculation about the impact of rising interest rates on housing. Interest rate increases may dampen the rate of home price appreciation, which many believe will be lower than we have seen in recent years. However, expected economic and job growth, which could bolster individual incomes will likely provide somewhat of an offsetting positive impact. Expect 3-4 pecent appreciation in housing nationally, with certain markets that remain well below their peaks, which are experiencing job and population growth likely outpacing this level.