Roofstock is an online marketplace for buyers and sellers of single-family rentals. Compared to traditional turnkeys, Roofstock is a third-party platform focused on thoroughly vetting solid investments and only takes 15% of all submitted properties for sale. Roofstock has a proprietary neighborhood rating that is important to understand. Let’s dive into their five different ratings and take a closer look at what each one means for your investment strategy.
What it Means- Neighborhoods with a ranking of 1 star are lower-income, higher crime rate areas. The majority of houses are investor-owned and employment rates are low. Additionally, the median home value and median income are low, and the schools are poor.
Price Point- Homes in 1-star neighborhoods have a median price point in the low $70,000's.
Expected Return on Investment- 1-star neighborhoods are the most risky, yet can have the highest possible reward.
Investment Strategy- Transitional Rental Strategy
Suggested Visio Loan Products- Pair with the Visio 5/1 ARM Rate Structure and 3-Yr Prepayment Penalty Options
What it Means- Neighborhoods with a ranking of 2 stars are lower-income with slightly higher than average crime rates. Investor ownership is about 50% and employment rates are at about 80%. Additionally, the schools are decent and the median home value and median income are mediocre.
Price Point- Homes in 2-star neighborhoods have a median price point in the low $90,000's.
Expected Return on Investment- 2-star neighborhoods are considered high risk, high reward.
Investment Strategy- Transitional Rental Strategy
Suggested Visio Loan Products- Pair with the Visio 5/1 ARM Rate Structure and 3-Yr Prepayment Penalty Options
What it Means- Neighborhoods with a ranking of 3 stars have mild median home values, close to 90% employment, and are only 40% investor-owned. They have a mix of new and older homes, decent school ratings, and slightly above average income levels.
Price Point- Homes in 3-star neighborhoods have a median price point in the high $130,000's.
Expected Return on Investment- 3-star neighborhoods have the highest balance between risk and reward
Investment Strategy- Transitional Rental Strategy
Suggested Visio Loan Products- Pair with the Visio 7/1 ARM Rate Structure and standard prepayment penalty
What it Means- Neighborhoods with a ranking of 4 stars are median to high income neighborhoods with over 90% employment, and less than 20% of homes are investor-owned. These neighborhoods have good schools and less than average crime rates.
Price Point- Homes in 4-star neighborhoods have a median price point in the low $190,000's.
Expected Return on Investment- 4-star neighborhoods tend to be more expensive and will see a higher-yield over a long-term period.
Investment Strategy- Permanent Rental Strategy
Suggested Visio Loan Products- Pair with the 30-Yr Fixed Rate Structure and standard prepayment penalty
What it Means- Neighborhoods with a ranking of 5 stars are your best neighborhoods with fantastic schools, high home values, high employment ratings, and high safety ratings. Darren Robertson of Northern Virginia Home Pro says almost no homes are investor-owned in these neighborhoods and the median income is well above average. "Investors typically turn their attention to up-and-coming suburbs with cheaper entry prices, as these areas have more room to grow in terms of capital growth."
Price Point- Investment homes in 5-star neighborhoods are hard too rare to put a median on, but expect to spend over $200,000.
Expected Return on Investment- 5-star neighborhood properties come at a steep price and will often see lower initial yield. However, with these properties you can also expect lower operational risks and high renter stability.
Investment Strategy- Permanent Rental Strategy
Suggested Visio Loan Products- Pair with the 30-Yr Fixed Rate Structure and standard prepayment penalty
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