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November - 2016 - issue > CEO Insights

Real Estate Investment: The Next Frontier for e-Commerce

Gary Beasley, Co-Founder & CEO, Roofstock
Monday, October 31, 2016
Gary Beasley, Co-Founder & CEO, Roofstock
Headquartered in California, Roofstock serves as the online platform exclusively for investing in leased single-family rental homes that generate cash flow day one. The entity provides research, analytics & insights to evaluate and purchase independently certified properties at set prices.

Why would anyone buy real estate without physically being there to see it? The short answer is that new technologies and improved data access now make it possible to invest in real estate with increasing confidence without physically being there. This is a big deal if you think about it. If you truly could buy real estate like you buy stocks or bonds, how might you think about your investment strategy differently? Without geographic constraints, the world becomes your investing oyster.

Take rental homes for instance. There are about 15 million of them around the U.S., representing about $2 trillion of assets, and an estimated 70 percent of them are owned by investors who live within a one-hour drive. While arguably convenient, this is a terrible diversification strategy as it only compounds concentration risk. For many individuals, their primary residence represents the largest investment they have. Layering on more real estate exposure in the same geographic area is the real estate equivalent of ‘doubling down on’ rather than ‘splitting eights.

Most experienced financial advisors will encourage a diversified portfolio of stocks, bonds and real estate or other non-correlated alternative investments. What is important to consider is that while real estate may have low correlation to the equity market, one could have real estate assets which are highly-correlated to each other. Fortunately, new technologies are making it possible to open up local real estate markets to global capital investment, allowing investors to buy properties with increasing confidence without geographic constraints.

Housing can be an emotional purchase for those seeking a home to live in with their family. However, when investors buy properties to rent out, they are more concerned with the cash flow potential rather than the color of the kitchen cabinets. Consequently, more and more investors are feeling comfortable buying investment homes sight-unseen, leveraging tools that have become available over the last several years that level the playing field for non-local investors.

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