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There are a lot of startups that operate using the same fundamental principle: Helping consumers save a lot of money on big-ticket purchases of inventory that you don’t control, and securing a small slice of each transaction. At its core, this is what Airbnb does. Same goes for TrueCar, the car shopping service that offers customers algorithmically crafted flat prices.
Roofstock is a new startup that’s launching its online marketplace today, and it wants to do the same thing for people who want to buy rental properties and become landlords, without any of the hassle of actually being a landlord.
In a release, the company also announced that it had secured $13.25 million in Series A funding led by Khosla Ventures, with participation from investors that include Ron Conway’s SV Angel, Marc Benioff, Opendoor CEO Eric Wu and StubHub founder Jeff Fluhr*.
The way Roofstock works is pretty straightforward. If you want to buy a single-tenant home that’s already leased, Roofstock’s marketplace offers a variety of properties at different price points. Once you spend $115,000 (random sample price from Roofstock’s website) on a property, your role in the transaction is effectively done. Roofstock has a list of certified property managers that it works with to maintain the property and do all of the landlord drudgery.
Roofstock CEO Gary Beasley explained to Re/code in a phone interview a bit more about the process, and why Roofstock isn’t as fishy as it might sound on the surface.
“You’re buying an entire home, but it’s a home that’s leased and packaged up like a commercial product. You can buy it at a fixed price on our website, just like buying a fixed stock on eTrade,” Beasley said. “The whole idea behind the site is that we wanted to separate investing from operating. You’ll be able to look at these homes that are already professionally managed, already purchased and renovated by institutional sellers.”
This sounds neat, but it also sounds like it could be a disaster. Couldn’t an absentee owner lead to property neglect? Also, what if property values suddenly decline? It’s not exactly an unheard of scenario.
“We have a lot of relationships and credibility in the SFR [single-family rental] space. We can make sure the inventory is high quality,” Beasley went on. “We interview dozens of property managers, and we’ve selected the top two or three to be certified for customer service, experience, good technology and accounting, etc. We interviewed some of their customers, and that’s one of the things that’s really, really important.
“We’re opening up local real estate to global capital markets.”
Beasley says that offering non-whole unit ownership, a “crowd-investing model” is “absolutely” in Roofstock’s future. Roofstock has financing partners that can offer loans to customers, and it charges sellers 2.5 percent of every transaction, and buyers 0.5 percent.
As of right now, you can only buy properties in a few markets in Florida, but the company plans to add more locations over time.
*$7 million of that Series A came in an A-1 round raised in December that was led by Bain Capital Ventures, with additional investment from Grey Wolf and CSC Venture Capital.
This article originally appeared on Recode.net.
