We just closed on the investment house I wrote about here.  Or, rather, maybe we just closed on it. It isn’t clear. More on that below.

This post is a summary of what I’ve learned and the process so far.

Be warned; this is a long post that will be dull if you’re not looking at turn key real estate investing.

The Choice of Turn Key Company

There are a few companies that are selling – via the internet – help buying rental properties in other parts of the country. Where we live, things are expensive; the available investment housing stock is limited. So, if we’re going to invest in a rental property, it’s easier to buy where things are cheaper.

We used Roofstock. There’s a lot about Roofstock to like; their fees are low, it’s relatively turn key, and they say they help a lot with the closing process.

The only serious alternative that I looked at was Homeunion, largely as a result of this post at Passive Income M.D.  I scoped out a few other companies too, but they were all generally very local and not terribly confidence-inspiring.

I went with Roofstock over HomeUnion for two reasons: Roofstock is a little bit cheaper and a little bit less turn key.

With Roofstock you choose the property management company (after they’ve negotiate discount terms for their people). With Homeunion, they are the property management company; and the fees are slightly higher than the property management folks that Roofstock identified.

Since one of my financial goals is to be in the weeds a little with my investments (though, of course, the right weeds), Roofstock looked like a slightly better bet, leaving aside from the lower costs. (though, also, lower costs!) I worried I would be paying HomeUnion to take the parts that I wanted to be actively involved in away from me, which would, of course, be bad. As a bit of a spoiler, that may have been a dumb view on my part.

On top of all of the fees and fun, I wanted the first foray into this world to be relatively cheap. I figured I’d make mistakes and I’d rather pay less to learn how to do this better. I found that I could make a lower initial investment with Roofstock than with Homeunion.

So Roofstock was the decision.

How Did Roofstock Do?

Of course, as Robert Frost observed, once you go down a path, you never know what would have been down another one. (he said it better) I know my experience with Roofstock wasn’t what I was hoping for; I’m not sure HomeUnion would have been better.

Though maybe it would have.

We made an offer on a house and, after a little back and forth, reached a contract for the sale. I’m happy with the number and with our return, though, of course, the return can always be higher. I’m projecting a cash on cash return of a little better than 12%, assuming assumptions about repairs and capital expenditures hold. A big assumption, but life is about risk.

After we reached the contract, Roofstock called quickly and explained how the process would go. In a nutshell, they said they’d help coordinate the stuff that has to be coordinated to get the sale through.

This was great, and comforting, and basically what I expected from the preliminary investigation I’d done.

All systems go; I was pretty enthusiastic about Roofstock.

This was not to last.

The Mortgage

First, we got a mortgage through the Roofstock suggested provider – TruMortgage. I compared with another lender, and found TruMortgage more competitive. Interest rates had gone up a little on us, and we locked at a place I felt ok about.

The mortgage application process was a bear. This was miles from the HomeUnion “You invest, we do the rest.” Part of it was a problem with getting a tax transcript – from years ago the IRS has put a possible identity fraud flag on my tax records which complicated things with the lender.

What was maddening, though, was that the lender couldn’t give me consistent information about what we had to do in light of that. I’d wager we spent an additional 10 hours chasing documents and coordinating with the mortgage processor.

She was good and patient, but, of course, there are way better ways to spend 10 hours.

The Inspection and Appraisal

The property had an exterior inspection, but needed an interior inspection (and there was a contingency in the contract to handle that). The appraisal also had to be done. Both had to have been done right after Christmas for the contingencies to be in effect. For reasons that are baroque and dull, neither was done in time.

So we extended the contingencies until after New Years, thinking the inspection and appraisal would be done by then.

But they weren’t.

Worse, no one at Roofstock was on top of the dates. They had told me they would be, but, untrusting lawyer that I am, I went ahead and calendared and plotted on my own. Only after I let them know that I hadn’t heard anything was there movement to get the stuff done.

So, on the evening the inspection contingency was to run out, I got the inspection report. I’m not sure what would have happened if there was a problem, but, thankfully, there wasn’t. Regardless, it was more of a pain and more stressful than it needed to be.

Roofstock said it was going to handle the inspection and the appraisal. I assume what happened is that the folks over there checked out for the holidays – which is totally reasonable – and this fell through the cracks.

But, still.

The Closing

The closing wasn’t quite smooth either. It was delayed a few times – which is fine and not a big deal. It took a little negotiating to get it set for nonbusiness hours, but, ultimately, that worked too.

The bigger issue is that I’m not quite sure whether it happened; it depends on what counts as “the closing.” A very nice woman came to our house with a bunch of documents to notarize. She gave us wiring instructions for the cash we needed to send to close.

We signed a bunch of documents with her, but one document was wrong, so we didn’t sign it. It showed a payment from us that was about $700 more than it should have been and more than other documents showed.

Also, the wiring instructions were missing key information.

As of right now, 24 hours after the notary came across our doorstep, I’m still not sure if we’ve closed. The closing company – which is different than Roofstock, but was selected by them – has asked us to sign the wrong document a number of times. I’ve asked them to correct it. They just ask us to sign it again. I’d wager I’ve spent about four hours today without meaningful progress. It’s like a discovery fight that you can’t bill for.

The folks at Roofstock have been sympathetic, but no progress has been made.

Sympathy < Progress.

Final Thoughts

I’m leaving aside a few other annoyances throughout the process: the property management person was incredibly difficult to actually get ahold of; the insurance company they suggested I use did a poor job of explaining its own forms, etc. Any transaction will have frustrations. I get that.

This was just way more frustration than I had gone in expecting.

In one sense, it’s hard to blame all of this on Roofstock – there were three problems and two of them were with outside companies. While Roofstock selects these companies, it isn’t inside them; it can’t directly supervise their work.

If the comparison, though, is with HomeUnion, that may not be accurate. As I understand HomeUnion’s model, they just do all of this stuff for you. Your job is to provide money then documents, then they do the rest.

Perhaps this isn’t representative of what using Roofstock is like. Maybe there’s a scale issue, where they don’t have enough deal flow to have the market power they need to keep their people from this kind of thing.

It may also be that the fantasy of turn key real estate investing is just that – a fantasy. The vision of having some one else do your real estate investing for you is seductive, but most seductive ideas turn out to be substantially less sexy than originally advertised. But if Passive Income M.D. can do it, why can’t I? Must doctors have all the fun?

I fear the number that you get if you divide the return by the number of hours I’ve put in on this. It’s not quite “You invest. We do the rest.”

Still, Roofstock does centralize a lot. The inspection process was really really easy. I appreciate the market data they gave (though supplemented it aggressively with my own research).

And, depending on whether the issue with the closing company is resolved, I might be the owner of a rental property.