Roofstock is a two-year-old, Oakland, Ca.-based marketplace for buyers and sellers of single-family homes that have tenants residing in them. The rather specific idea behind it is appealing on a couple of levels, including because both institutional and retail investors can buy and sell homes without forcing renters to leave the property during a transaction — a big problem for many families in the Bay Area, for example.
Buyers also avoid the hassle of finding renters, gaining a property that will presumably generate cash flow from the outset.
Perhaps it’s no wonder that VCs like it, too. In fact, today, the 65-person company is announcing $35 million in Series C funding led by Canvas Ventures that brings its total funding to just less than $70 million altogether. Other participants in the round include earlier backers Lightspeed Venture Partners, Bain Capital Ventures, Khosla Ventures, Nyca Partners, QED Investors, and FJ Labs.
Yesterday, to learn more, we had a quick exchange about the round with Roofstock cofounder and CEO Gary Beasley, who was previously the co-CEO of Starwood Waypoint Residential Trust, one of the largest publicly traded single family rental (SFR) companies in the U.S. Earlier in his career, Beasley also spent more than two years as CEO of Waypoint Homes, an operating company that acquires, renovates, leases and manages a portfolio of rental homes in markets around the country.
TC: So how many properties have sold on Roofstock so far?
GB: We don’t disclose the absolute number of properties sold on the platform, but it represents hundreds of millions of dollars in value this year alone.
TC: How, or where, does the company drum up inventory?
GB: Roofstock properties are broadly sourced, from small retail sellers to mid and large institutions.
TC: Is there anything preventing new landlords from increasing the rent of tenants as soon as a property changes hands?
GB: Landlords need to honor existing leases and follow local laws and regulations when contemplating rent increases.
TC: Where does Roofstock operate — in what markets?
GB: We have listings in 15 markets across the U.S., each of which is unique and presents different characteristics and opportunities for investors to gain real estate exposure.
TC: Do you have partnerships with other real estate brokers?
GB: Using an outside broker is not a requirement for clients to buy or sell homes on Roofstock, but the marketplace does allow agents to earn referral fees when they register clients who transact through us, which enables agents to develop deeper relationships with their clients and expand their business opportunities. We’re also is beginning to work with agents to help them sell homes with tenants in place, which is more difficult to do through the traditional MLS channel.
TC: We’ve read that prices are pre-determined. What does that mean? That Roofstock establishes a price for the property and interested buyers can take or leave it?
GB: We provide sellers with a number of tools to help them set their listing prices, but ultimately the seller determines the list price.
Part of the data that we share with sellers relates to comparable values, along with estimates of time to sell and the probability of a sale at various prices based on algorithms devised by our data science team. Buyers can purchase the property at the listed price to take it off the market immediately, or make an offer at another lower value through our “make an offer” feature.
TC: Do you use any other information ‘hubs’ to assess the value of properties?
GB: We reviews various third party valuations like House Canary and Zillow, as well as our own proprietary analyses and data set, including information gleaned from activity on the Roofstock marketplace, to provide a valuation range.
TC: Is a company like Loopnet a competitor, given that it sells multi-tenant properties, some of which are homes — or is that afield from what Roofstock is doing?
GB: Loopnet is a platform for commercial property, where we cater to the $3 trillion single-family rental market.
TC: How does Roofstock get paid? Do you take a cut of each transaction and also charge a subscription to list the property?
GB: There are no membership or access fees to view properties on Roofstock. Registering for the site is free. We make money through each transaction. We charge 2.5 percent to sellers, and .5 percent to buyers.
TC: Where do you advertise these properties?
GB: Roofstock’s homes are found on our website. We also uses various strategies and tactics to drive site traffic and make potential buyers and sellers aware of the marketplace, both online and offline.
TC: How long on average does it take to sell a house?
GB: While there are certainly exception, properties that sell typically go under contract within 30 days of being listed on the site. During the second quarter of this year, 44 percent of the homes sold went under contract within 14 days. Some particularly popular homes are sometimes snatched up by investors within minutes of hitting the site.
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