Roofstock, a platform for investing in the single-family rental rental market, announced yesterday a Series E raise of $240 million, raising its valuation to $1.94 billion. Founded in 2015, the company had previously been valued at $600 million in January 2020. SoftBank Vision Fund 2 led the round with participation from a long list of investors, both existing and new, including Khosla Ventures, Lightspeed Venture Partners, Bain Capital Ventures, Canvas Ventures, Citi Ventures, First American Financial, Expanding Capital, 7GC & Co., JLL Spark and SVB Capital. Additional investors include The Private Shares Fund, Masco Ventures, Newton Investment Management North America, Pegasus Technology Ventures, CAZ Investments, Moving Capital (known as Uber Alumni Investment Club) and DoorDash Angels.
With approximately 15,000 homes in its current portfolio, Roofstock has completed nearly $5 billion in transaction volume to date, with more than half of that amount taking place in the last year. Gary Beasley, cofounder and CEO, attributes the success of the nearly seven-year old company to the all-in-one nature of its platform which includes extensive algorithms for predicting profitable purchases, fractional ownership opportunities and property management services.
“To my knowledge, nobody out there is looking at the whole opportunity the way that we are,” says Beasley. “We have a number of different business lines, we work with institutional investors all the way down to retail investors. We have the whole universe of demand covered. And then we have mapped all 90 million homes and have a database about them. So we know which ones are rentals and which ones could be rentals.”
Beasley further explains their model is less vulnerable than other institutional investor models since they have granular-level financials about the renovation costs. “We have an algorithm that does an Automated Valuation of every property,” says Beasley. “But once we get them under contract, every property before we go hard on any money is fully inspected. We have a guaranteed contract with a guaranteed price on the renovation. It used to take us 20 minutes to underwrite a house. But now it takes us less than five minutes to underwrite a house because our underwriting algorithms [are] getting better. But it still takes eyes on the actual home.”
Roofstock plans to use the latest infusion of funds to expand its portfolio and staff, acquire other potential startups, increase its digital offerings for landlords and property management services and further explore technologies just gaining a foothold in the real estate space. For the latter their most immediate initiative is a blockchain tokenization project as part of a tech accelerator within the Stevens Center for Innovation in Finance at the University of Pennsylvania’s Wharton School.
“We’re going to tokenize the actual properties,” says Beasley, which Roofstock will facilitate by putting the ownership of each property in an LLC. “We realized that stepping into the ownership of the homes, wrapping them, and selling off the tokens could be the way that we could then create these beautiful little investable units. Then from our standpoint, we could build a nice business managing those properties over the long term, and creating a trading platform for investors to be able to get in and out of them for little to no cost.”
He sums up the long term vision for the project by saying “You don’t have to worry about going out and getting your own financing. That financing doesn’t look to the borrower. It looks to the token itself, which owns the home. So it’s an innovative approach. It seems subtle but the beauty of that is, in many ways, it’s quite democratizing, because you could be a new investor without a big credit history. Or maybe you want to do more than ten homes, which is all you can do with Fannie Mae.”
For more information on their tokenization project, head here.