Roofstock convinced investors to buy rental homes online sight unseen by solving two problems: 3D virtual tours showing true property condition, and a tenant certification system displaying payment histories. The platform uses algorithmic matching to suggest comparable neighborhoods across cities, letting investors diversify without the traditional one-hour drive radius.
Chapters
That's such a great point about building trust. And I was actually going to mention that, you know, because I can imagine early on it's like, how do you get someone to, you know, search and kind of, you know, find a house and buy it online, you know, sight unseen?
So, yeah. So what we realized is having done this and bought thousands of houses in our last company, the only thing you really needed to see, you could do all the research online, neighborhoods and all that kind of stuff. You needed To know the condition of the property. And so we solved that with virtual tours and not just a traditional virtual tour, but we found a company that did 3D animated tours that removed all the furniture so you could actually see the physical home without furniture and you could go through it. And as a rental property, that was really important. So you wanted to know the layout and the physical condition. And then we also did some work certifying the tenants. Looking at the tenant payment history. So you knew what you were inheriting. Everything else, you know, all the financial analysis and all that could be done remotely. So what we tried to do was solve for that last mile of what you would typically need to do. And I think with rental homes, what's different about it than if any of you were looking to buy a home to live in, it's not an emotional transaction. If you're looking to buy a place to live in, You might want to spend some time walking around the neighborhood, seeing what it sounds like, smells like, you know, what it's like. Investors are looking at the yield and the IRR and the risk associated with that neighborhood. So we thought we could solve for that. And it was a good way to actually deliver a product that did not exist that could be underwritten remotely. And the big, I think, unlock for investors was, wow, rather than just buying homes where I live, which 80% of rental homes are owned by people within an hour of their drive. It's like the whole company, the whole country is now available to you. And so what we would do when people would start searching in a particular area, kind of like Amazon, we would show them homes in other cities that had similar neighborhood scores, similar type return profiles. And it was really, really interesting for them to be able to say, wow, I can really diversify my holdings. I could, be in 3 or 4 different cities. I'd tell you early on, one of the things that got me super excited, I knew we were onto something. I was on a flight and I, you know, I somehow got upgraded. I was lucky. I never flew. It was when Virgin Airlines was still there. I was sitting up front. The guy next to me worked at LinkedIn and I was on my computer and he looked over and he said, Roofstock, what's that? And you're like, oh, you know, it's my my company, blah, blah, blah. He said, is that the down payment on that house? I said, no, dude, that's the whole price. It was a $125,000 house in Atlanta. And he was looking at homes in the Bay Area. So honest to God, during our flight, he bought a house on Roofstock. And he started searching and he bought a house. He landed and he sent a text to his wife, guess what we just bought? And She said, WTF? But it was just so easy and the returns were so compelling. And he never thought that he could buy a rental property where he didn't live because he didn't know how to underwrite it, didn't know how to manage it. And we solved all that stuff. So to the extent you could make things that easy, you know, obviously the financial implications are important too, but the ease. Is I think in real estate there's a lot of misery and a lot of mystery in transactions, and we were trying to eliminate as much of that as we could. It's hard in real estate because it's so complicated.
