It seems like every innovative, disruptive service changing the world today was immediately met with skepticism upon release. When Uber came out, taxis and regulators claimed that nobody would want to get into a random driver’s car. When Airbnb launched, hotels laughed at the premise that travelers would give up on their traditionally luxurious experiences.
After all, no one knows better than Gary Beasley how resistant to change buyers, sellers and renters can be when large sums of capital and living spaces are on the line. A veteran of Waypoint Real Estate Group, ZipRealty and Starwood Property Trust, Beasley told PYMNTS how he and Roofstock Chairman and similar real estate maven Gregor Watson were confronted with the problems inherent in selling hundreds and hundreds of homes Watson had invested in some years ago. When there wasn’t a broker to be found with the bandwidth to move that number of properties, Beasley couldn’t square the ease and convenience of innovations in other industries with how obsolete and inefficient this process had become.
“The cost of selling a home today, as an institutional loaner or as another investor with a tenant in it, is very, very high,” Beasley told PYMNTS. “It’s not only the 5 or 6 percent brokerage commission, but you lose several months of rent, and you typically have to renovate the home to put it on the MLS and sell it. So, it’s about 10 to 12 percent leakage to get your property viable, and it takes months at a time.”
Beasley and Roofstock’s solution to that is to inject some digital disruption into this frozen-in-time industry. Starting with several hundred homes in Florida — a hotbed of inexpensive real estate and high activity, Beasley explained — Roofstock offers would-be investors a detailed look at properties in an online marketplace-styled interface. Along with investment requirements, like net and gross yields, annual appreciation and unlevered cash flow for each property, Roofstock includes relevant information on current renters, such as the status of background checks, confirmation of on-time rent payments and general data on income levels. Buyers get more detailed information on renters only once they close on homes, which takes about 21 days to clear.
Roofstock certainly streamlines a process that has frustrated buyers, sellers and renters for years, and while Beasley is confident that this improvement alone will drive interest in this new way of property investing, that’s not where he sees its true strength. That, Beasley explained, lies in the way Roofstock can attract a new generation of investors to assets they might never have considered before.
“Investors today are oftentimes forced to own investment properties in or near the same market they live in,” Beasley told PYMNTS. “That’s really been the only way they’ve been able to do it, which is not a great investment strategy from a diversification standpoint. What Roofstock can do is get people to start thinking about decoupling where you live from where you invest.”
Though Roofstock is starting out in Florida, it’s based in San Francisco, a city full of high-earning millennials whose paychecks might not be enough to buy Bay Area real estate but are more than enough to invest in Floridian homes. Beasley said that Roofstock has already received dozens of requests from prospective investors who don’t own their own homes and have little experience investing in real estate but have the capital and desire to become digital landlords and ladies nonetheless.
And to make sure this new crop of millennial investors have familiar tools at their disposal, Roofstock includes 3D tours of every property, cleared of furniture and furnishings — a hint of virtual reality’s imminent role in real estate, perhaps.
For such a seemingly innovative platform in an old-fashioned real estate industry, Beasley isn’t worried about ruffling any feathers, a la Uber and Airbnb. In fact, the nature of buying and selling rented homes might just be so inefficient and unprofitable at the moment (or, at least, not as efficient and profitable as it could be), that Roofstock might not have any rivals of industry inertia to fight against. In fact, Roofstock pays fees to agents and brokers for referring new clients to its site, and its ongoing relationships with on-site property managers grounds it even more strongly in the industry.
Time will tell whether Roofstock’s plan to bring real estate investments into the 21st century pans out, but it’s certainly easier to think that, once buyers and sellers get a taste of how different the process can be, the market won’t be able to unring that bell.