• Ian Ippolito

The Real Estate Crowdfunding Review November 2019 Update

Updated: Apr 2, 2020

Comprehensive review of Roofstock One; Four club feeders onboarding; "How to evaluate sponsor compensation"; SEC clamps down on iFunding and KPMG for fraud; and more...

(Usual disclaimer: I'm just an investor expressing my personal opinion and not a registered financial advisor, attorney or accountant. Consult your own financial professionals before making any financial decisions. Code of Ethics: We do not accept any money from any sponsor or platform for anything, including postings, reviews, referring investors, affiliate leads or advertising. Nor do we negotiate special terms for ourselves in the club above what we negotiate for the benefit of members.).

New Comprehensive Review

  • RoofStock One Roofstock One is the latest residential real estate product from Roofstock. An investor in Roofstock One has the option to purchase a small portion of a rental property (versus having to pay for the whole thing in the original RoofStock). This is nice because an investor can get in at a much lower minimum. And another great improvement is that investors no longer have to take on the huge burden of the loan themselves (like they did with the original). This greatly reduces investor risk and hassle. This is a standard feature on other crowdfunding sites, and is a good to see here. And the debt itself is at a moderate 50-60% LTV which many moderate investors will probably like. Roofstock One also puts their own money on the line with 10% skin in the game. (Although this is only guaranteed for one year, which is arguably too brief to know if the investment is going to truly hit its projected numbers or not). The investor also has the ability to liquidate in six months. But this is limited by requiring the investor to know the person who will purchase from them, or through a non-guaranteed redemption scheme that Roofstock One may not be setting aside explicit reserves for (unlike competitors). On the minus side: bankruptcy protection is incomplete and there is no audit (which is unusual for a firm that claims $1 billion in transactions). Also certain information vital to managing crucial cost overruns seems to be missing. Additionally lack of transparency on performance, medium-term debt, limited time-span skin in the game and certain legal and financial structures