Here’s a new proposition from a company that markets single-family rental homes to mom-and-pop investors: Want to buy a tenth of a house?Roofstock is pitching a chance for those interested in the asset class to start small. The company will buy a home and put it in a trust, then sell stakes for as little as $5,000. The aim is to provide investors direct access to rental income -- and the tax benefits of owning commercial real estate -- while lowering the buy-in and eliminating inconveniences like having to carry a loan on their personal balance sheet.
“The whole idea at our founding was to create a platform where real estate could trade much more like a stock,” said Gary Beasley, chief executive officer at Roofstock, a four-year-old startup based in Oakland, California. “At the end of the day, you can go to a website and after a few clicks, you have real estate exposure.”
The move is the latest attempt to popularize strategies developed by institutional investors in the aftermath of foreclosure crisis, when firms such as Blackstone Group LPand Starwood Property Trust Inc. amassed large portfolios of rental homes. As the deep bargains dried up, the nascent industry consolidated, and companies that sprung up to serve the Wall Street landlords started offering property management, finance and brokerage services to smaller investors.
Beasley more or less personifies that trend: He was CEO at Waypoint Homes, one of a handful of landlords that were eventually rolled up into industry behemoth Invitation Homes Inc., then co-founded Roofstock. The company also brokers portfolio sales of rental houses to larger investors, but for the most part, pitches itself as a popularizing force that helps small property owners invest like institutions.
Roofstock plans to start with properties in the $100,000 to $200,000 price range, beginning in Atlanta and Indianapolis, using loans to finance no more than half the purchase price. The program is limited to accredited investors, who are theoretically savvy enough to evaluate the risk that home repairs or soft rental markets eat up profits.
The company will take property- and asset-management fees out of rental income before distributing returns. Eventually, it plans to launch a secondary market to connect buyers and sellers, but in the near term, it will buy shares back from investors who want liquidity.